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The controversial Freddie Mac second lien purchase pilot has gained conditional approval by the Federal Housing Finance Agency.

This proposal, which Freddie Mac officials posited as an alternative to cash-out refinancings in a high interest rate environment, generated concern from opponents that it puts the government-sponsored enterprise in an area served by the private market.

During the comment period, which ended on May 22, the FHFA received 150 letters.

“The thoughtful engagement from public stakeholders confirmed the value of a transparent process for evaluating potential new Enterprise products and informed the parameters of the conditional approval,” said Sandra Thompson, the FHFA’s director, in a press release and accompanying statement.

“The limited pilot will allow FHFA to explore whether this closed-end second mortgage product effectively advances Freddie Mac’s statutory purposes and benefits borrowers, particularly in rural and underserved communities.”

Among the limits FHFA established are a $2.5 billion maximum in loan purchases, over an 18-month period. The individual loan limit is $78,277, which FHFA said corresponds to subordinate lien thresholds established in the qualified mortgage definition.

The first mortgage must have 24 months’ seasoning and it has to be for the borrower’s primary residence.

After the 18-month period ends, the FHFA will analyze the data to determine whether the objectives of the pilot were met. Any potential increase to the volume limit or extension of the duration, or conversion to programmatic activity would be treated as a new product that is subject to public notice and comment and FHFA approval.  

The accompanying statement reaffirmed a belief that even many opponents held, that Freddie Mac is able to do this under its charter.

Furthermore, the limits ensure that private capital is not crowded out. It also extends the ability to obtain second mortgages to underserved markets.

The early reaction has been mixed. Christopher Whalen, whose Whalen Global Advisors, submitted a comment letter opposing the program, said most people in the industry expected the Biden Administration to go forward despite the substantial public opposition.

“Like the changes made by the FHFA to the [loan level pricing adjustments] grid, the impact of this change will be modest for the enterprises and negative for consumers,” Whalen said in an emailed comment. “Low-income borrowers are far better served in the FHA/VA/USDA market,” referring to the three government-guaranteed mortgage programs.

The U.S. Mortgage Insurers also opposed approval of the pilot, but took a conciliatory tone in its statement.

“While today’s announcement includes important limitations to the pilot, further clarifications should be provided including on how loan-to-value ratios will be calculated, information about applicable debt-to-income limitations, a specific exclusion for ‘piggyback loans,’ and additional details on capital and pricing treatment,” the statement from Seth Appleton, president, said. “USMI recommended that any future expansion of an approved product be subject to additional public notice and comment, and we are pleased that Director Thompson included this policy as part of FHFA’s conditional approval.”

On the other hand, the Community Home Lenders of America, welcomed the move.

“CHLA thinks this is an important product given that skyrocketing interest rates have made getting a refinance unaffordable,” Scott Olson, its executive director, said in a statement.

The Mortgage Bankers Association, which asked the FHFA to do more analysis before going ahead with the program, said it appreciated the regulator’s detailed responsiveness to its comment letter.

The process “produced a pilot rollout that is limited in size and duration, mitigates the impact on the private-label securitization market for second liens, focuses on borrowers with lower loan balances, and will encourage participation by smaller lenders that do not have easy access to liquidity for closed-end seconds,” MBA President and CEO Bob Broeksmit said in a statement.

“MBA and its members will remain engaged with FHFA and Freddie Mac to monitor the results of the pilot and ensure that it remains available to lenders of all sizes and business models and avoids disrupting the developing private-label securitization market for second liens,” Broeksmit continued.

Source: nationalmortgagenews.com

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S&P Global (formerly Markit) PMIs are the standard PMI around the world, but have long been second fiddle to ISM PMIs in the U.S.  That’s certainly still the case, but in this era of ever-increasing data dependence, we’ve seen a drastic change in the market’s willingness to trade the preliminary S&P PMI releases, which are among the earliest economic indicators for any given month (it will be another two weeks before we get ISM PMIs for June). The current installment features a logical reaction, in which the highest Services PMI in more than 2 years is pushing bonds into weaker territory following overnight gains (ironically driven by weaker PMI data in Europe).

Source: mortgagenewsdaily.com

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Mortgage rates fell below 7% last week for the first time since March — leading to an uptick in the number of applications for loans from would-be home buyers.

The rate for a 30-year fixed mortgage fell from 7.02% to 6.94% for the week that ended June 14, according to Mortgage Bankers Association data released on Wednesday.

The five-year adjustable-rate mortgage fell to 6.27% from 6.45% — the lowest level since February, according to the data, which was first reported by Bloomberg News and MarketWatch..

Mortgage rates fell below 7% last week for the first time since March. Getty Images

There was also an increase in the number of mortgage applications for home purchases in the seven-day period that ended on Friday.

The market index rose 0.9% to 210.4 for the week ending June 14 from a week before. A year ago, the index stood at 209.8.

“Purchase applications increased a small amount for the week, led by applications for conventional loans,” Mike Fratantoni, MBA chief economist, said in a statement.

Federal Reserve is more likely to cut interest rates sometime this year.

Investors are banking on at least one rate cut.

Last week, Fed officials said that while inflation has crept closer to their 2% target, they still expect to cut their benchmark interest rate just once this year — possibly as late as December.

The housing market has been in a slump which has been exacerbated by sky-high interest rates and sticky inflation. REUTERS

The policymakers’ forecast for one rate cut was down from their previous projection of three cuts.

Inflation has remained stubbornly high, forcing the Fed to keep the benchmark rate between 5.25% and 5.50% — the highest in 23 years.

The benchmark rate has remained at that level since July of last year, after the Fed raised it 11 times to try to slow borrowing and cool inflation.

High mortgage rates and rising prices continued to put a damper on the spring home-buying season.

Existing home sales fell 1.9% to a seasonally adjusted annual rate of 4.14 million in April from a revised 4.22 million in March, the National Association of Realtors reported.

An anticipated interest rate cut by the Fed could spur more home-buying. REUTERS

Sales dropped across the country — down 4% in the Northeast, 2.6% in the West, 1.6% in the South and 1% in the Midwest.

The median price of previously occupied homes rose 5.7% to $407,600 — the tenth straight increase and a record for April.

Lawrence Yun, the association’s chief economist, called the sales drop “a little frustrating.’’ Economists had expected sales to come in at 4.2 million.

Figures for May have yet to be reported.

With Post Wires

Source: nypost.com

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Federal regulators announced the approval of rules intended to provide quality control and eliminate potential discriminatory practices in the use of automated valuation models in appraisals.   

The rules were originally proposed a year ago by a group of federal agencies involved in their design, including the Office of the Comptroller of the Currency, Federal Housing Finance Agency, Federal Reserve, Federal Deposit Insurance Corp., Consumer Financial Protection Bureau and the National Credit Union Administration. 

The regulations will require mortgage originators and secondary market issuers to have procedures in place to ensure confidence in AVM estimates, protect against data manipulation and provide a backstop against conflicts of interest. They also mandate ongoing random sample testing and compliance with nondiscrimination laws. 

The final rule does not spell out specific requirements for how institutions are to structure their practices but allows each to determine their own procedures based on their size and risk profile. 

“The flexible approach to implementing the quality-control standards provided by the final rule will allow the implementation of the standards to evolve along with changes in AVM technology and minimize compliance costs,” the announcement said.

Finalization of the proposed regulations comes after a comment period, with the agencies receiving approximately 50 responses from stakeholders.

The addition of nondiscriminatory policy surrounding AVM use — what the regulators referred to as the rule’s “fifth factor ” —  received support from many commenters but also detractors. 

“While existing nondiscrimination law applies to an institution’s use of AVMs, the agencies proposed to include a fifth quality control factor relating to nondiscrimination to heighten awareness among lenders of the applicability of nondiscrimination laws to AVMs,” the federal announcement said.

Supporters said nondiscrimination could be seen “as a dimension of model performance and a required aspect of quality control,” adding that failing to address bias might result in ” safety and soundness risk.”

But public remarks also pointed to pushback involving such a mandate, with some comments suggesting documented instances of AVM bias were not prevalent. Others mentioned the fifth factor duplicated existing laws and other policies, while at the same time, provided no clear performance metric for users to determine if bias existed within data. 

Some opposed pointed to the cost of compliance and limited resources at their institutions.

“They argued that small entities do not have access to an AVM’s data or methodology, are unable to validate the algorithms that AVM providers use, and lack the staff to assess the AVM models results,” according to the announcement. 

Commenters also said the burden of nondiscrimination compliance should fall on the AVM providers, who often hold proprietary models. The regulators noted a number of individuals calling for the creation of a separate independent third-party nonprofit to test AVM systems to ensure compliance. Such an entity would both save lenders time and improve data quality, they said.   

In addition to mortgage originations, the policy applies to AVM use in the determination of values for loan modification requests and applications for home equity lines of credit. But the regulation exempts licensed appraisers utilizing AVMs in the process of their work.      

Use of automated models gained momentum as the government-sponsored enterprises began seeking alternative appraisal methods to address speed and costs. But their adoption previously drew criticism from the likes of CFPB, who raised concerns about potential algorithmic biases involved with any tools influencing credit decision making. 

Source: nationalmortgagenews.com

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The bond market was closed on Wednesday for the Juneteenth holiday.  As such, mortgage lenders were either closed or unable to update mortgage rates based on market movement.  Today’s rates are perfectly in line with Tuesday morning’s, on average, even though the bond market is slightly weaker.  

Weakness in bonds refers to lower prices and higher yields/rates.  Mortgage rates almost always move with the bond market, but when the movements are small, there can be exceptions. 

That’s the case today as the losses leave mortgage-backed bonds right in line with the levels seen on Tuesday morning.  Bonds did move on to stronger levels by Tuesday afternoon, but not to a sufficient extent for most lenders to update their pricing.

The net effect is an average top tier conventional 30yr fixed rate that’s still a hair above 7%.  

Source: mortgagenewsdaily.com

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(CNN) – Mortgage rates fell for the third straight week to their lowest level in almost three months.

Freddie Mac reported Thursday that the standard for a 30-year fixed-rate mortgage averaged 6.87% for the week ending June 20.

That’s down from last week’s 6.95% average and down from a 2024 peak of 7.22%. Still, mortgage rates remain higher than anything seen in the decade before 2022.

That’s the year the Federal Reserve began to raise interest rates to combat inflation.

Despite rates trending down, owning a home is becoming harder for many Arizonans. A study by Bankrate found you need to make at least $110,271 to comfortably afford a home in Arizona. That’s up 67% from 2020.

The median home price in the state is $451,500, according to Redfin. In the Phoenix Metro, it’s $461,990, up 5.5% from last year.

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Source: azfamily.com

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Looming changes to real estate commissions are already causing ripple effects in mortgage lending.

The National Association of Realtors will implement new rules this summer, following a $418 million settlement to end lawsuits challenging broker commissions. Four major real estate players also agreed to massive settlements in the past year, paving the way for a new landscape for homebuyers, home sellers and their representatives.

Housing finance stakeholders, who held their breath through the legal proceedings, are beginning to respond to the changes affecting borrowers. While the government has already amended one rule to protect certain consumers, other concerns regarding affordability and blurred lines between Realtors and loan officers remain.

Here’s the latest on what you need to know about real estate agent commissions.

Source: nationalmortgagenews.com

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Ultimately an Uneventful Week Despite Micro-Volatility

By:
Matthew Graham

Fri, Jun 21 2024, 4:41 PM

Ultimately an Uneventful Week Despite Micro-Volatility

This morning featured an overnight rally driven by weakness in European PMI data and a logical sell-off following much stronger PMI data in the U.S.  Specifically, S&P Global’s Services PMI rose to the highest level in more than 2 years.  This is some of the earliest available data for the month of June and the burden of refutation is on incoming data that is week’s away (for instance, next week’s headline report, PCE, is still for the month of May). Today’s selling never got out of hand, however, and that meant the week as a whole was wholly uneventful in the bigger picture. 

    • S&P Services PMI
      • 55.1 v s 53.7 f’cast, 54.8 prev
    • S&P Manufacturing PMI
      • 51.7 vs 51.0 f’cast, 51.3 prev
    • Existing Home Sales
      • 4.11m vs 4.10m f’cast, 4.14m prev
    • Leading Economic Indicators
      • -0.5 vs -0.3 f’cast, -0.6 prev

09:36 AM

Moderate overnight gains, following Europe.  10yr down 4bps at 4.22.  MBS up 3 ticks (.09).

10:43 AM

Weaker after PMI data with 10yr now up 1.2bps.  MBS down 2 ticks (.06).

12:45 PM

Sideways to slightly stronger after AM sell-off.  MBS unchanged.  10yr down 0.3bps at 4.258

04:37 PM

Low volatility afternoon.  MBS up 1 tick (.03).  10yr down 0.4bps at 4.256

 Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.

Source: mortgagenewsdaily.com

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Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate mortgages to write unbiased product reviews.

Last week, 30-year mortgage rates averaged around 6.58%, according to Zillow data. Mortgage rates ticked down a bit following the release of May’s Consumer Price Index data, which showed that inflation cooled off last month. 

Mortgage rates are expected to fall further later this year, but how much they’ll go down depends on how inflation trends in the coming months. If inflation is slow to come down, rates might not improve significantly.

If you’re planning to buy a home soon, you can lessen the impact of high rates by shopping around and getting quotes from multiple mortgage lenders. This will help you find the lowest rate available, saving you money in the long term.

Today’s mortgage rates

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Today’s refinance rates

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Mortgage Calculator

Use our free mortgage calculator to see how today’s interest rates will affect your monthly payments:

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

By clicking on “More details,” you’ll also see how much you’ll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.

Mortgage Rate Projection for 2024

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased dramatically in 2022 and throughout most of 2023.

Many forecasts expect rates to fall this year now that inflation has been coming down. In the last 12 months, the Consumer Price Index rose by 3.3%. This is a significant slowdown compared when it peaked at 9.1% in 2022, but we’ll likely need to see more slowing before rates can drop substantially.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

When Will House Prices Come Down?

We aren’t likely to see home prices drop this year. In fact, they’ll probably rise.

Fannie Mae researchers expect prices to increase 4.8% in 2024 and 1.5% in 2025, while the Mortgage Bankers Association expects a 4.3% increase in 2024 and a 3.3% increase in 2024.

Sky high mortgage rates have pushed many hopeful buyers out of the market, slowing homebuying demand and putting downward pressure on home prices. But rates have since eased, removing some of that pressure. The current supply of homes is also historically low, which will likely push prices up.

What Happens to House Prices in a Recession?

House prices usually drop during a recession, but not always. When it does happen, it’s generally because fewer people can afford to purchase homes, and the low demand forces sellers to lower their prices.

How Much Mortgage Can I Afford?

A mortgage calculator like the one above can help you determine how much house you can afford. Play around with different home prices and down payment amounts to see how much your monthly payment could be, and think about how that fits in with your overall budget.

Typically, experts recommend spending no more than 28% of your gross monthly income on housing expenses. This means your entire monthly mortgage payment, including taxes and insurance, shouldn’t exceed 28% of your pre-tax monthly income.

The lower your rate, the more you’ll be able to borrow, so shop around and get preapproved with multiple mortgage lenders to see who can offer you the best rate. But remember not to borrow more than what your budget can comfortably handle.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

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Senator Jon Tester, D-Mont., talks to Senate Banking Committee chair Sherrod Brown, D-Ohio, in 2022. The Senate Banking Committee has scheduled a confirmation hearing for Christy Goldsmith Romero — now serving as a member of the Commodity Futures Trading Commission — to chair the Federal Deposit Insurance Corp., but her ultimate confirmation will depend on unified support from moderate Democrats like Tester and progressive ones like Brown.

Bloomberg News

WASHINGTON — The Senate Banking Committee will consider the nomination of Christy Goldsmith Romero to chair the Federal Deposit Insurance Corp. on July 11, the panel announced. 

Goldsmith Romero, who currently sits on the board of the Commodity Futures Trading Commission, was just recently announced as the Biden administration’s pick to lead the FDIC in the wake of a workplace misbehavior scandal at the agency. 

The committee, in the same hearing, will also consider the nominations of Caroline Crenshaw to be a member of the Securities and Exchange Commission, Kristin Johnson to be assistant secretary of financial institutions at the Treasury Department and Gordon Ito to be a member of the Financial Stability Oversight Council with expertise in insurance. 

The Senate Banking Committee hearing marks the first official step in the process to confirming Goldsmith Romero’s nomination — a race against the clock at this point with a limited number of legislative days left in Congress. Goldsmith Romero would replace current FDIC Chairman Martin Gruenberg, who announced he would resign upon the confirmation of a successor. 

Should the nominations pass the Senate Banking Committee, they will go to the full Senate.

While Goldsmith Romero hasn’t triggered any pushback so far from Republicans, the confirmation of her nomination is still far from guaranteed. 

Democrats have enough votes to usher her and the other nominations through the Senate, but only if they remain united in their support — including among those seeking reelection in vulnerable seats in the 2024 elections. Republicans have been unusually successful in sinking the nominations of the Biden administration’s financial regulatory nominees in the past, pulling Democratic support, for example, from picks like Sarah Bloom Raskin and Saule Omarova. 

Should she make it through the confirmation process, Goldsmith Romero would inherit an FDIC that not only is still reeling from the public revelation about the agency’s culture, but that has a busy regulatory schedule. 

On Thursday — in what could very well be Gruenberg’s final board meeting as chairman —  the agency finalized a rule bolstering resolution plans for large regional banks. Other key rulemakings, like the Basel III endgame proposal, are still pending. 

Goldsmith Romero potentially would have only a limited number of months with a Democratic board. Should Donald Trump win the presidential election, Goldsmith Romero would not necessarily have to step down as chairman, but would be up against a 3-2 partisan split that would make governing the agency difficult.

Source: nationalmortgagenews.com