Month: August 2023

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To paraphrase a common saying, opportunity is a by-product of chaos. To some participants in the growing wholesale channel, the turmoil in the mortgage business is leading to strong business prospects.

Take for example, Plaza Home Mortgage, which added some additional volume because of the spring home buying season, but also got more business merely from new people joining the company. The company is predominantly a Ginnie Mae shop, participating in the government lending programs that feed that secondary market outlet. It focuses on first-time home buyers and renovation loans.

“Some of it is the result of us on the wholesale side in particular, picking up some additional sales reps,” said Mike Fontaine, co-president and chief operating officer. Plaza “picked up some good talent as others left that sector.”

Several competitors had issues with the economics of the wholesale business, as tight margins got even tighter between rising rates and pricing pressures.

“Prices have been kind of all over the map on any given day, there’s always somebody that’s sticking out,” Fontaine said. “It seems like we’ve tried to be consistent on our pricing and fair, and it’s still challenging in this market.”

Plaza is looking to tap into the growing mortgage broker industry with improved technology that has made it easier for them to work with the company, Fontaine noted.

“I think people will keep becoming brokers for a couple of different reasons and one would be the opportunity to have additional products available to you that you don’t have if you’re a retail loan officer,” he said. “The other is that a lot of people that are brokers want to be their own boss, they’re entrepreneurial in nature.”

The technology investment needed to start a brokerage is lower than in the past because of improvements in software and hardware, as well as workflow. Meanwhile Plaza offers a lot of training free of charge, Fontaine said.

Another wholesaler, Constructive Capital, is a Chicago-area lender with a national footprint that only does business with residential property investors.

The company made its first loan in January 2018, but company president Ben Fertig has been in the mortgage business since September 1996 and exclusively on the residential investor side since 2012.

It originates debt service coverage ratio as well as short-term fix-and-flip bridge loans, primarily on one-to-four unit properties; it does some lending on 5-to-40 unit buildings as well. It’s a business model that is good in all markets, but especially now at a time when conventional and government production is hard to come by, Fertig said.

A large percentage of Constructive Capital’s volume comes from mortgage brokers who focus on the investor market, but it sees opportunity in the broader sector that works with conventional and/or government-guaranteed owner-occupied lending.

These brokers “really need to explore these asset classes, to get engaged because it provides the diversification of revenue stream; it provides value when it comes to recruiting and retaining loan officers just due to the product diversification,” Fertig said. “While these products are not price or rate agnostic, they’re much less sensitive to them.”

Constructive Capital’s business grew 60% between 2021 and 2022. “And we are on pace to grow another 25% through 2022 to 2023 through the first five months of the year,” Fertig said.

And it has done so profitably, unlike some other wholesalers, the company’s warehouse lenders have told Fertig.

“We kept our cost to originate extremely low,” he said. “So it’s not uncommon for us to do 700 loans with 110 employees.”

Another reason for its financial success is that Constructive Capital diversified its funding sources. Traditionally, DSCR lenders have had to turn to the private-label securitization market as a secondary market exit strategy.

Instead, Constructive Capital created direct relationships with life insurance companies.

Because of their need for long duration assets, life insurance companies have invested in mortgages, primarily commercial but also residential.

Thus it can be a more stable outlet than securitization in these environments, Fertig noted.

“When everybody else back in 2021 was selling to securitizers, we made a little less on those loans,” he said. “But we established forward commitments that have carried us from 2021 through now, which has given us more consistency and reliability when it comes to price than you would otherwise get in the securitization market.”

Reputation is another differentiator among wholesalers. At the time the bottom dropped out of the market because of COVID, Constructive Capital was running a contest for its brokers. But while it was able to fund some of its pipeline, other loans did not close.

Some of those involved lost earnest money, Constructive Capital covered that, costing it a half a million dollars.

“But when the market normalized in the third and fourth quarter of 2020 a lot of people remembered that,” Fertig said.

And that, along with its niche, will help the company keep going strong in the future, he added.

“We’re spending a lot of time and we’re going to convince the broker base that these products should be a long term focus, regardless of the cycle,” Fertig declared.

Source: nationalmortgagenews.com

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SoCal homebuying June 2023 (Chart by Flourish)

Southern California’s housing market continued rebounding in June, despite below-average sales and the highest mortgage rates in seven months.

With inventory at the lowest level for a June in a dozen years, even this year’s diminished demand exceeds the number of homes for sale, driving up prices.

As a result, the median price of a Southern California home — or price at the midpoint of all sales — was $730,000 in June, CoreLogic reported Wednesday, Aug. 2.

SEE MORE: Mortgage industry, homebuyers pinched by high rates, declining cash

That’s down just 0.7 of a percent, or $5,000, from a year earlier. It also follows four months of off-and-on price gains that brought the region’s median within $20,000 of the all-time high of $750,000 reached in April 2022.

Home prices in the six-county region were up 9% since the beginning of the year.

And prices were up by more than 3% in Orange and San Diego counties, CoreLogic figures show. In Orange County, the median home price hit a record high of $1.059 million.

“The continued imbalance between buyers and sellers continues to pressure home prices,” CoreLogic Chief Economist Selma Hepp said in a statement Tuesday. She added that four out of 10 U.S. home sales are cash transactions, making them immune from higher mortgage rates.

RELATED: Shopping for a home? List of challenges grows

Nevertheless, lower demand and reduced inventory limited home sales to 16,320 transactions in June, the smallest tally for any June in records dating back 36 years, CoreLogic figures show.

June home sales were down 24.3% from a year earlier and we’re 40% off June 2021 levels, when mortgage rates were less than half of where they are now and the homebuying frenzy was hottest.

It was also the 19th straight month that sales were down on a year-over-year basis, CoreLogic figures show.

The pattern is the same that has gripped the region’s housing market since the start of the year, with homeowners choosing to keep historically low mortgage rates rather than selling.

“Despite elevated interest rates, the demand for housing continues to outpace the availability of homes for sale as buyers slowly adapt to the new normal,” Jennifer Branchini, president of the California Association of Realtors, said last month.

Here are key takeaways from the latest housing market data:

— The region’s market contrasts with the nation as a whole. CoreLogic reported Tuesday that U.S. single-family home prices were up by 1.6% since June 2022 and by 4.8% since the beginning of the year.

Locally, the median price for a single-family home was $785,000, down 1.3% from June 2022.

— Home prices rose 2.1% from May to June even though the typical house payment for a median-priced home hit a high of $3,772 per month.

Thirty-year fixed-mortgage rates averaged 6.7% in June, according to Freddie Mac, boosting a typical Southern California house payment by more than 10% from a year earlier. June’s average was the highest since November.

SEE MORE: What the Fed’s July rate hike means for homebuyers and sellers

— Home prices are increasing despite lukewarm demand, figures from Redfin show. Redfin’s Homebuyer Demand Index, based on home tour and service requests, is down 3% from a year ago, the online real estate brokerage reported Thursday. In addition, mortgage-purchase applications are down about 23%.

— But inventory has dropped more than demand. For-sale inventory in the region fell steadily for the past 11 months to just over 25,000 listings in June. That’s the lowest number for June and the fifth-lowest for any month since February 2012.

— Rising mortgage rates and higher prices hit entry-level buyers even harder, especially in the region’s most affordable area, the Inland Empire. The minimum income needed to afford an entry-level home rose 7.5% to almost $105,000 a year in the Inland Empire, Redfin reported.

By comparison, the minimum income needed to buy a home rose 4.7% to $151,070 a year in Los Angeles County; 6.3% to $180,224 a year in Orange County; and 6.7% to $161,671 a year in San Diego county.

“There’s no such thing as a starter home anymore,” Redfin Senior Economist Sheharyar Bokhari said. “The most affordable homes for sale are no longer affordable to people with lower budgets.”

— While mortgage rates will probably stay elevated for several more months, they’re likely to start coming down before the end of the year, Redfin researchers said.

CoreLogic projected that U.S. home price appreciation will continue accelerating for the rest of 2023, reaching 6.8% by next January.

Here’s a county-by-county breakdown of median home prices and sales for June, with annual percentage changes:

— Los Angeles County’s median fell 2.4% to $830,000; sales were down 22.7% to 5,278 transactions.

— Orange County’s median rose 3.3% to $1.059 million; sales were down 16.6% to 2,296 transactions.

— Riverside County’s median fell 2.9% to $560,000; sales were down 25.7% to 3,278 transactions.

— San Bernardino County’s median fell 5.0% to $475,000; sales were down 28.7% to 2,269 transactions.

— San Diego County’s median rose 3.1% to $835,000; sales were down 24.5% to 2,581 transactions.

— Ventura County’s median rose 0.2% to $807,000; sales were down 35.6% to 618 transactions.

Source: ocregister.com

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In the technology world, and more specifically, the venture capitalist world, the word “disrupt” gets thrown around an awful lot. Too much really. There’s even a Disrupt conference.

Every new business these days seeking millions of dollars in funding has grand plans to disrupt the status quo, whatever that might be in a given industry.

Of course, many great (and silly) ideas never actually materialize because of the many hurdles a company must climb to effect change.

But that hasn’t stopped Lenda, a California-based online mortgage refinance shop, to dream the impossible dream.

Mortgages in Seconds? Yeah Right…

  • Lenda’s ultimate goal is to fund mortgages in seconds
  • As opposed to weeks or months
  • A lofty goal but one that isn’t unique to the disruptors
  • You can’t argue that the mortgage industry is in need of change and could definitely be a lot faster

Lenda apparently has plans to eventually fund mortgages in a matter of seconds, as opposed to days or even months.

At the moment, they’re being a little more reasonable, shooting for 21 days from application to close, as opposed to the industry average of 39 days, per the latest Ellie Mae Origination Insight Report.

However, their near-term goal is to get that number down to a week (7 days), and eventually 48 hours. If that all pans out, their “mortgages in seconds” mantra could potentially become reality.

And while it all sounds crazy, part of me is thinking, “Why not?” Why is the mortgage industry the same as it has always been? Why can’t a company come along and pull an “Uber” and make a meaningful change in this space as well?

I’m assuming doubters will first point to the regulatory landscape, which makes it difficult to get anything done quickly in the mortgage world. All that paperwork is also a concern.

Not to mention the many different parties that must all come together to get a home loan funded.

No Middleman or Sales Staff at Lenda

  • One thing they’ve done to differentiate themselves
  • Is cut out the sales staff
  • This should translate to a cheaper home loan for the borrower
  • They also rely on technology like electronic delivery of paperwork to speed things up and make life easier for homeowners

But Lenda claims to do things differently, working exclusively online to get loans funded quicker and more efficiently.

For example, you can fill out the mortgage application online and use DocuSign to send over electronically signed documents, which translates to 40 fewer pages to print, sign, and fax. It’s also good for the environment.

During the application process it tells you how many pages of paperwork you’ll avoid, along with the number of headaches. Cute.

In the future, they hope to provide instant approvals after a credit pull, at which point an exact list of conditions would be generated. And borrowers could soon have the ability to pull real-time data, such as bank statements and tax returns, into the application.

They’ve also cut out the “middleman,” aka the sales rep, to both streamline the process and cut down on costs.

Lenda claims to save at least $8,000 per refinance by eliminating the mortgage broker and going with a direct-to-consumer approach, although the rates/fees I saw didn’t seem all that different from what I’ve seen elsewhere.

Why Use Lenda to Get a Mortgage?

  • The home loan process is completed entirely online
  • They might offer lower mortgage rates thanks to their tech and lack of salespeople
  • You can get a $500 lender credit if someone refers you to Lenda
  • Might be able to close faster than traditional lenders
  • But they only offer 30-year and 15-year fixed-rate mortgages

If you’re wondering why you should choose Lenda, one key advantage is that the home loan process is entirely digital. Aside from being easier, it might result in a faster loan closing.

Additionally, Van den Brand says mortgage interest rates are generally about an eighth- to a quarter-percent lower than other lenders, and that the APR will be lower via reduced closing costs.

That’s all good and well, but will they actually be able to shorten the process and reduce the burden on the consumer? Time will tell on that one.

They’ve certainly got a good group of investors, including Tom Fallows of Google Shopping Express, Winklevoss Capital (those Facebook twins), Kiva investor Sundeep Ahuja, and PayPal investor Jared Kopf, to name but a few.

Lenda recently received $1.54 million in seed money and plans to enter several more states in the future. They currently lend in Arizona, California, Colorado, Florida, Georgia, Illinois, Michigan, Oregon, Pennsylvania, Texas, Virginia, and Washington, though they’re licensed in 43 states.

At the moment, they only offer 30-year and 15-year fixed-rate mortgages backed by the underwriting guidelines of Fannie Mae and Freddie Mac. So there are some loan type limitations that won’t satisfy all homeowners.

Future product offerings include jumbos, HARP, FHA, and CRA loans, and perhaps adjustable-rate mortgages.

Now just imagine if companies like Opendoor and Lenda come together.  We’ll be able to buy, sell, and finance homes in hours, or maybe even seconds with nothing more than our smartphones.

While they only operate in 12 states currently, Lenda expects to go live in other states in the near future.

Update: In early 2019, Lenda became Reali Loans thanks to the company’s acquisition by fintech startup Reali.

Source: thetruthaboutmortgage.com

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The average U.S. mortgage rate for a 30-year fixed loan fell four basis point this week to 2.67% – the lowest rate in the Freddie Mac’s Primary Mortgage Market Survey’s near 50-year history. This week’s mortgage rate broke the previous record set on Dec. 3 and is the first time the survey has witnessed it fall below 2.7%.

“The housing market continues to surge higher and support an otherwise stagnant economy that has lost momentum in the last couple of months,” said Sam Khater, Freddie Mac’s Chief Economist. “Mortgage rates are at record lows and pushing many prospective homebuyers off the sidelines and into the market.

“Homebuyer sentiment is sanguine and purchase demand shows no real signs of waning at all heading into next year,” Khater continued.

The average fixed rate for a 15-year mortgage also fell last week to 2.21% from 2.26%.

A Tuesday analysis from Fannie Mae’s Economic and Strategic Research group predicted rates would hit their trough at 2.7%, and since the 10-year Treasury yield has remained at or above 90 basis points through the beginning of December, mortgage spreads are continuing to compress.

5 reasons to refinance your mortgage right now

If you’re thinking about refinancing your mortgage, here are five reasons why you might want to act now and reach out to a loan officer.

Presented by: Citi

“While there may be some resistance to the 10-year yield consistently pushing above 1% in the coming months, with vaccination efforts and subsequent stronger economic growth, we expect Treasury yields to move higher over the next year,” the Fannie Mae report said.

Last week, Khater noted mortgage rates managed to retain their record low numbers despite higher Treasury yields – resisting a typical correlation.

A Wednesday statement from the Federal Open Market Committee revealed that the Federal Reserve plans to keep interest rates low until labor market conditions and inflation meet the committee’s standards. Fed Chairman Jerome Powell said to get inflation back to 2% though is going to “take some time.”

Overall, Fed purchases have helped to drive mortgage rates and other loan interest rates to the lowest level on record by boosting competition for bonds, which compresses yields.

With the release of the Fed’s latest intentions, Mortgage Bankers Association chief economist Mike Fratantoni said the MBA now expects the Fed to maintain these low rates at the zero level for years to come.

Source: housingwire.com

Apache is functioning normally

Credit…Jonathan Carlson
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Feeling Mortgage-Rate Envy? You’re Not Alone.

With interest rates climbing, a new form of one-upmanship is making the rounds: the mortgage-rate humble brag.

  • Aug. 4, 2023

At a rooftop party on a steamy July night in Philadelphia, the margarita machine was churning, the seafood boil was hearty, and the conversation turned to the default of the upwardly mobile: real estate.

Almost anyone shopping for a home in the 2020s knows the script by now: Someone mentions their recent home purchase, a tale undoubtedly rich with drama, stress and suspense. Guests, well schooled in the volatility of the housing market, lean in for the follow-up: When did you buy?

The response to that key question “is normally followed by an ‘Oooh,’” said Evan Barker, 36, a lawyer who attended the party and has participated in enough of these exchanges to know that the “Oooh” means one of two things: You either got the interest rate of a lifetime, or you squarely did not.

the 30-year mortgage rate bottomed out at 2.65 percent, a few months before Mr. Barker and Ms. Gallagher refinanced, besting the national average with a rate of 2.375 percent.

smug, shocked or hopeless, depending on where you fall on the spectrum.

“There is almost a cross-generational envy,” said Övül Sezer, an assistant professor of management and organizations at Cornell University, who studies humble bragging.

Flaunting wealth and good fortune is nothing new. But Americans, for the most part, avoid sharing specifics about money. Sure, you’ll plaster news about your promotion on Facebook and on the platform formerly known as Twitter, but you’ll probably keep mum about the salary package that comes with it. When it comes to real estate, the attitude is no different. A gleeful homeowner may gloat about vanquishing the competition in a bidding war, but they won’t mention the sale price, or their monthly payments.

Federal Reserve’s continued efforts to wrestle inflation under control. So timing, not skill, dictates the rate — and timing is a byproduct of luck.

The pandemic exacerbated inequalities that existed before 2020. For many wealthier Americans, the pandemic was a financial boon. They kept their jobs, were able to work remotely, enjoyed bonuses and raises, and had cash on hand when interest rates plummeted to keep the economy afloat. They were the ones best positioned to pluck up homes, driving up prices. The people who spent 2020 and 2021 struggling through job losses, illnesses or other financial hardships likely missed out on the moment, and are now the ones enduring the hard consequences of rampant inflation.

The interest rate cut “was this free handout to people who didn’t really need it,” said Daryl Fairweather, the chief economist at Redfin. For everyone else, “that door closed as soon as people started to get back on their feet.”

Or as Sharon Reshef, who last month bought a $400,000 one-bedroom apartment in Washington D.C., put it: “It’s really hard to plan your life around macroeconomics.”

That hasn’t stopped some of her slightly older colleagues in Senator Kirsten Gillibrand’s office from teasing her about her 6.625 percent interest rate.

“It’s just a gentle ribbing,” said Ms. Reshef, 30, the research director for the senator from New York, who now spends half of her take-home pay on her mortgage. “But as long as we’re here, I will say that not a lot of people in my cohort own property, especially as a single person. Regardless of the interest rate, I have that one up on them. I can definitely brag.”