Renting

Apache is functioning normally

In a nutshell, this morning’s economic data rapidly reversed the weakness seen after yesterday’s Fed announcement, thus restoring the lowest yields achieved after yesterday’s CPI data.  Today’s core monthly PPI is probably the bigger consideration, coming in at 0.0 vs 0.3–a big beat to be sure.  Jobless Claims in the 240k+ zone also help, but there are some doubts as to the seasonal adjustment factors due to the way unadjusted data has bled through to adjusted data over the past two years. 

Specifically, the big spike/drop in July/Aug is something that shows up in NON-Adjusted numbers, but is also showing up in adjusted numbers as seen below.  This suggests the adjustments need adjusting and could be overstating the spike seen in claims today (emphasis on “COULD”).

Perhaps those doubts play a role in the bond market having second thoughts about the pace of this morning’s rally.  Either way, yields look to have hit a solid floor when attempting to improve on yesterday’s best levels.

Source: mortgagenewsdaily.com

Apache is functioning normally

If you want to tap into your home’s equity but keep the ultra-low mortgage rate on your home, you have options. 

Westend61/Getty Images


For many current homeowners, holding onto the ultra-low mortgage rates secured during the pandemic is a top priority. During that time, mortgage rates were hovering below or near 3% at that time, so many homeowners would prefer to avoid a loan at today’s mortgage rates — which currently average over 7% for a 30-year fixed mortgage. After all, a 7% mortgage rate would result in much higher monthly costs and interest charges over the life of the loan, even when borrowing a similar amount.

However, mortgage rates aren’t the only thing that has soared over the last few years. Home values have skyrocketed, too, and the average homeowner with a mortgage now has nearly $300,000 in home equity, about $206,000 of which is tappable. This gives homeowners an affordable borrowing option for major expenses like home renovations or repairs, education costs, business investments or debt consolidation. 

That said, it’s important to understand what you’re getting into if you want to retain your current low mortgage loan rate while borrowing from your home equity. After all, some equity access methods, like cash-out refinancing, require you to give up that coveted low mortgage rate. Not all do, though. Some alternatives will let you tap into your home’s equity while keeping your existing low-rate loan intact.

Explore your top home equity borrowing options online now.

3 home equity borrowing options that let you keep your low mortgage rate

There are several options homeowners have for borrowing against their home equity while retaining the low mortgage rate they acquired during the pandemic, including:

A home equity line of credit 

A home equity line of credit (HELOC) is a revolving line of credit that is secured by the equity in your home. You can borrow against the line of credit as needed (up to the credit limit), and the interest rate is typically variable, adjusting periodically based on market conditions. 

A big benefit of HELOCs is that these borrowing products can be a flexible alternative to lump-sum borrowing. With a HELOC, you draw funds from the line of credit as needed, only paying interest on the outstanding balance rather than the full line amount. 

And, while HELOC rates can fluctuate over time based on market conditions, the average rates are currently lower than many other borrowing options, like credit cards. For example, the average HELOC rate is currently just over 9%, but the average credit card rate hovers over 21% right now. 

So, even with the variable rate component, opting for a HELOC over a personal loan or a credit card would be preferable for most homeowners. And, so would the fact that a HELOC allows you to retain your original mortgage rate rather than swapping it out for a new one. 

Explore the HELOC and home equity loan borrowing rates you could qualify for here.

A home equity loan

With a home equity loan, you borrow money via a lump-sum loan that is secured by the equity in your home. The interest rate is usually fixed, and you repay the loan over a set term, which can range from five to 30 years or more. 

One big upside to opting for a home equity loan is that the interest rates on these loans are locked in for the full repayment term. And, because this type of home equity loan functions as a second mortgage rather than replacing your current mortgage, you won’t have to worry about giving up the low mortgage rate you currently have. 

Another benefit to opting for a home equity loan is that the rates on these types of home equity loans average 8.61% currently. So, as with HELOCs, home equity loan rates are a lot more affordable than many of your other borrowing options right now. 

A home equity sharing agreement

If you’re a homeowner who’s hesitant to take on new loans, a home equity sharing agreement is an alternative equity investment model offered by some specialized providers. With these products, homeowners receive a lump sum cash payment by selling a share of their home’s future appreciation value when they eventually sell the property. 

While fees for these arrangements can be steep, opting for one helps you avoid going into more debt — and you won’t have to trade in your current mortgage loan rate to get access to the funding. In turn, it could be worth considering in the right circumstances, but you’ll need to do your homework to understand exactly what you’re getting into.

The bottom line

By exploring the home equity borrowing options outlined above, you may be able to leverage the equity you’ve built up in your home while retaining your low mortgage rate that was secured during the pandemic era. And, that can be a significant benefit in today’s high-rate environment, especially if your current mortgage rate is hovering near 3% — as current mortgage loan rates are over twice as high. But before you make any moves, it’s essential to carefully consider the costs, risks and long-term implications of each home equity loan borrowing option before deciding which one is the best fit for your financial situation.

Angelica Leicht

Angelica Leicht is senior editor for Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.

Source: cbsnews.com

Apache is functioning normally

After two weeks of declining volumes, home loan applications showed renewed strength, with refinances, particularly, bouncing higher on lower interest rates, the Mortgage Bankers Association said. 

The MBA’s Market Composite Index, a measure of weekly application activity based on surveys of the trade group’s members, leaped a seasonally adjusted 15.6% for the seven-day period ending June 7. In the prior holiday-shortened week, the index had dropped 5.2%. Despite the latest upturn, last week’s surge only left volumes flat compared to the same survey period of 2023.  

The 30-year fixed-rate conforming average decreased by 5 basis points for the week, declining to 7.02% from 7.07%. Points used to help buy down the rate were unchanged at 0.65 for 80% loan-to-value ratio mortgages. Loans with conforming limits of $766,550 in most markets make them eligible for sale to the government-sponsored enterprises.

“Mortgage rates were trending lower over the course of last week until a stronger than anticipated employment report resulted in a bounce back,” said Mike Fratantoni, MBA senior vice president and chief economist, in a press release. 

Still, activity increased across both conventional and federally backed lending, with a surge in the latter helping propel overall volumes. The seasonally adjusted Government Index accelerated 27.1% from the previous survey, buoyed by applications coming through the Department of Veterans Affairs.

“Lower rates earlier in the week meant a strong increase in refinance activity, particularly for VA borrowers, who jumped on the chance to lower their rates,” Fratantoni said. 

The Refinance Index rose 28.4% from seven days earlier, with VA volumes up 142.7%. Year over year, the index was up a similar 28.8%. Elevated refinance activity garnered a 35.2% share relative to total weekly volume, increasing from 31.1%.

At the same time, the Purchase Index also climbed up a seasonally adjusted 8.6% from a week earlier. But compared to the same survey period a year ago, volumes dropped 11.9%.

“Multiple data sources are now indicating that home inventory levels, while still historically low, are up significantly from last year at this time. This is good news for many prospective homebuyers who have been frustrated by the lack of homes on the market,” Fratantoni said. 

Thanks to renewed interest coming from VA borrowers, government-sponsored applications ended up expanding its portion of weekly volume. VA-guaranteed mortgages grew to 14.7% from 12.1%, more than offsetting the decline in Federal Housing Administration-backed loans, which narrowed to 13.1% from 13.2%. Applications coming from U.S. Department of Agriculture programs grew to a 0.4% share from 0.3% week over week. 

Other fixed mortgage rates among MBA lenders either flattened or decreased alongside the conforming average. The 30-year jumbo rate for loans with balances exceeding the conforming limit inched down to an average of 7.18% from 7.21%. Borrowers typically applied 0.54 worth of points compared to 0.41 a week earlier. 

At the same time, the average rate of the 30-year FHA-backed loan remained at 6.87%. But points to buy down the rate decreased to 0.92 from 0.96 for 80% LTV-ratio loans.

The 15-year fixed-rate average took a larger fall of 15 basis points to 6.6% from 6.75%. Points decreased to 0.55 from 0.63. 

Heading the opposite direction, the mean 5/1 adjustable-mortgage rate average finished 7 basis points higher from the previous week, rising to 6.45% from 6.37%. Points used on the loans, which start with a fixed 5-year term, jumped to 0.81 from 0.63.

Consumer interest in adjustable-rate mortgages typically rise and fall in the same direction as fixed rates. But while rates fell, the ARM Index still managed to increase by 7%. The share of ARMs relative to total activity eased down, though, to 6.3% from 6.7% in the previous survey period.

Source: nationalmortgagenews.com

Apache is functioning normally

Mortgage application activity recovered nicely last week from a downturn during the previous holiday-shortened week, helped by a temporary drop in interest rates. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage application volume, increased 15.6 percent on a seasonally adjusted basis and was 26.0 percent higher on an unadjusted basis.

The Refinance Index jumped 28.0 percent from the previous week and was also 28 percent above its level the same week one year ago. The refinance share of applications increased to 35.2 percent from 31.1 percent the previous week.

Applications for home purchases rose for the first time since May 3. The seasonally adjusted Purchase Index increased 9.0 percent and was 19.0 percent higher before adjustment. The index is still 12.0 percent lower than during the same week in 2023.

“Mortgage rates were trending lower over the course of last week until a stronger than anticipated employment report resulted in a bounce back, with the weekly average for the 30-year fixed mortgage rate decreasing to 7.02 percent,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Lower rates earlier in the week meant a strong increase in refinance activity, particularly for VA borrowers, who jumped on the chance to lower their rates.  Overall refinance activity was more than 27 percent above one year ago.”  

Added Fratantoni, “On a seasonally adjusted basis and compared to the holiday-adjusted level from the prior week, purchase activity also increased. Multiple data sources are now indicating that home inventory levels, while still historically low, are up significantly from last year at this time. This is good news for many prospective homebuyers who have been frustrated by the lack of homes on the market.”

Highlights from last week’s Mortgage Application Survey

  • The average size of loans pulled back from $375,300 the prior week to $373,200 and loans for home purchases dipped to $428,700 from $429,800. 
  • The FHA share of total applications decreased to 13.1 percent from 13.2 percent while VA loan applications accounted for a 14.7 percent share, up from 12.1 percent. The USDA share of total applications increased to 0.4 percent from 0.3 percent the prior week.  
  • Despite the increase late in the week, the average 7.02 percent rate for conforming 30-year fixed-rate mortgages was 5 basis points below that of the previous week. Points were unchanged at 0.65.
  • The rate for 30-year FRM with jumbo loan balances decreased to 7.18 percent from 7.21 percent, with points increasing to 0.54 from 0.41.
  • The rate for 30-year fixed-rate mortgages backed by the FHA was unchanged at 6.87 percent, with points decreasing to 0.92 from 0.96.  
  • Fifteen-year FRM rates decreased to 6.60 percent from 6.75 percent and points dropped to 0.55 from 0.63.
  • The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) increased to 6.45 percent from 6.37 percent, with points increasing to 0.81 from 0.63.
  • The adjustable-rate mortgage (ARM) share of activity decreased to 6.3 percent from 6.7 percent a week earlier.  

Source: mortgagenewsdaily.com

Apache is functioning normally

Mortgage applications shot up 15.6% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) weekly application survey for the week ending June 7.

On an unadjusted basis, the market composite index increased 26% compared with the previous week. The refinance index increased 28% from the previous week and was also 28% higher than the same week one year ago. The seasonally adjusted purchase index increased 9% from one week earlier. The unadjusted purchase index increased 19% compared with the previous week but was still 12% lower than the same week one year ago.

“Mortgage rates were trending lower over the course of last week until a stronger than anticipated employment report resulted in a bounce back, with the weekly average for the 30-year fixed mortgage rate decreasing to 7.02%,” said Mike Fratantoni, MBA’s SVP and chief economist in a statement. “Lower rates earlier in the week meant a strong increase in refinance activity, particularly for VA borrowers, who jumped on the chance to lower their rates. Overall refinance activity was more than 27% above one year ago.”

He added: “On a seasonally adjusted basis and compared to the holiday-adjusted level from the prior week, purchase activity also increased. Multiple data sources are now indicating that home inventory levels, while still historically low, are up significantly from last year at this time. This is good news for many prospective homebuyers who have been frustrated by the lack of homes on the market.”

The refinance share of mortgage activity increased to 35.2% of total applications from 31.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3% of total applications.

The FHA share of total applications decreased to 13.1% from 13.2% the week prior but the share of VA applications rose to 14.7% from 12.1% from the prior week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.02% from 7.07%, with points unchanged at 0.65 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.

The average contract interest rate for 5/1 ARMs increased to 6.45% from 6.37% with points increasing to 0.81 from 0.63 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 

Source: housingwire.com

Apache is functioning normally

Despite recent easing, inflation comes in as the top worry for half of American consumers, and it has likely implications for future credit and mortgage borrowing.

Approximately 50% of Americans listed rising prices for daily expenses, including groceries, gas and utilities, as their top financial concern in the next six months, according to the latest quarterly consumer pulse study from Transunion. Meanwhile, 84% ranked it in their top three, the highest mark since the credit reporting and data provider began collecting such data two years ago. The latter share is up five percentage points from one year ago. 

Compounding inflation near the top of the list were mortgage costs and interest rates, with 47% and 46% of respondents putting the impact of such costs in their top three. 

“Consumers are facing distinct challenges when taking into account today’s high inflation and interest rate environment,” said Charlie Wise, senior vice president and head of global research and consulting at Transunion, in a press release.

“From filling up a tank of gas to making a rental payment to buying groceries, most consumers are paying more today for everyday expenses than they ever have.”

The combined trends of rising prices, housing costs and interest rates may also end up taking a cut out of potential mortgage borrowing. Fourteen percent of likely credit borrowers planned to take out a mortgage in the next year, decreasing from 21% a year ago.  

The May Consumer Price Index released on Wednesday could point to some easing on the way, though. Inflation rose 3.3% annually, slowing for the first time in four months. From April to May, the index also showed prices flattening. 

For many consumers, any relief will be welcome. Only a 48% share of people in Transunion’s survey said their incomes were keeping up with the rising rate of inflation, but that percentage dropped sharply among the subset of consumers expressing the most concern about price hikes. Just 26% of that group said their wages were able to keep pace with increased costs, while 42% said their finances were worse today than a year ago. 

Transunion’s latest research corresponds to other recent consumer polling showing the effects of inflation on the American consumer. Research conducted by Morning Consult for the J. Ronald Terwilliger Center for Housing Policy and National Housing Conference found 23% of Americans struggling to make ends meet, with 30% indicating they were only managing to meet expenses. 

The Morning Consult poll also showed one-third of homeowners facing difficulty over the last year in making their mortgage payments. Meanwhile, 49% of renters reported struggling to make rent. 

Similarly, insurance firm Nationwide recently said a majority of 64% of consumers viewed their financial situation as only fair or poor, attributing much of that sentiment to housing costs. 

Two-thirds of people surveyed by Nationwide also expect housing costs to head higher over the coming year. Meanwhile, 21% said they had tapped into retirement savings or would consider it to help pay for housing-related expenses.

Rising financial worries could be changing consumer behavior toward borrowing and spending beyond mortgages, with 30% intending to refinance or apply for new credit in response, Transunion said. Close to 59% of the group said it would likely be in the form of new credit cards. Among those expressing concerns over inflation, 62% would apply for a new card.

Consumer anxiety might raise warning flags about future borrower performance, with delinquencies increasing 

“We have seen over the last couple of years a lot of deterioration in credit performance, and that includes credit cards, personal loans, auto loans,” Wise said in an interview, attributing current delinquency trends to lending trends during the robust pandemic economy of a few years ago.

“Lenders were feeling very good about extending credit now to even riskier borrowers, because their books looked so good. Everybody was spending.” 

Although mortgage delinquencies also saw small upticks, performance among borrowers remained relatively strong compared to other credit products, thanks to the amount of equity in their homes, Wise said.

But while consumers acknowledge inflation challenges, Transunion also found a sizable percentage of 55% expressing optimism about their own 12-month financial outlooks, with expectations of rising income countering more pessimistic views on current prices. Approximately 47% said they expected to see income growth in the  next year. 

Younger generations were more likely to have a positive forecast, with 62% of Generation Z expressing optimism about their finances. By comparison, less than 50% of Generation X and baby boomers held the same view.

The counterintuitive divergence in opinion about current price levels and future financial opportunity may lie in impressions the public has about what expenses should be versus economic realities.

“Their anchor is still set on what prices they think are the right prices from three years ago,” Wise said. 

“The situation is getting better, but a lot of consumers don’t see the difference between inflation and prices. They view them as the same.”

Source: nationalmortgagenews.com

Apache is functioning normally

Straightforward Session as Traders Wait For More

By:
Matthew Graham

Mon, Jun 10 2024, 3:24 PM

Straightforward Session as Traders Wait For More

Monday ended up being rather uneventful for the bond despite its role as the lead-off hitter for an all-star line-up.  There were no significant economic reports on tap, but the 3yr Treasury auction managed to come in weak enough to prompt a bit of additional selling.  Losses were short-lived and trading levels returned to pre-auction levels about 90 minutes later.  That left a sideways-to-modestly-weaker tone intact for the day as traders wait for ultra-high consequence data and events on Wednesday.

09:58 AM

modestly weaker overnight and little-changed since then.  MBS down 3 ticks (.09) and 10yr up 1.5bps at 4.476

01:40 PM

a bit weaker after 3yr Treasury auction.  10yr up 2.8bps in total on the day at 4.489. MBS are down an eighth of a point in 6.0 coupons

03:20 PM

Recovering some of the post-auction weakness now.  MBS down 3 ticks (.09) and 10yr up 1.9bps at 4.48

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

Source: mortgagenewsdaily.com

Apache is functioning normally

Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.

Tim Maxwell

Mortgage Expert

Tim Maxwell is a freelance personal finance writer with over two decades of media experience. His work has been published in Bankrate, CBS News, Experian and other outlets. Tim is passionate about financial literacy and empowering people to take control of their finances. When he’s not writing or geeking out over his budget, he enjoys creating memories with his family in the Sierra Nevada mountains.

Read more articles by Tim Maxwell

Source: newsweek.com

Apache is functioning normally

As mortgage companies turn to artificial intelligence for some tasks, they’re under pressure to comply both with fair lending laws and emerging guidance around AI itself, and that’s raised questions for the industry and its vendors about how to approach the two.

“There’s a lot of noise around AI and fair lending,” said Tori Shinohara, a partner at Mayer Brown. “If you look at the consensus of interagency pronouncements around the use of responsible AI or the White House blueprint for an AI Bill of Rights, those all have anti-discrimination components.”

However, while there’s guidance in this area, there hasn’t been formal regulation, she noted.

“Federal regulators, including the prudential regulators, whenever they put guidance on AI, it almost always has some sort of anti-bias component to it. But in terms of true regulation, there isn’t anything out there yet that is specifically regulating the use of AI in mortgage lending for anti-discrimination purposes,” Shinohara said.

Whether there is formal regulation in this area on the horizon remains to be seen.

“I think the thought is the existing regulatory framework for fair lending: the Fair Housing Act, Equal Credit Opportunity Act, and state laws are sufficient to prevent discrimination in connection with AI and in mortgage lending or servicing, because they’re so broad and cover discrimination as a result of a model in addition to discrimination as the result of an individual decision,” she added.

So these two federal laws are what mortgage companies may want to prioritize in compliance, but mortgage professionals should take note that public officials and agencies are looking at fair lending in new ways too.

“Both laws require any aspects of a credit transaction to be fair, and historically that was interpreted as being just underwriting and pricing,” said Kareem Saleh, founder and CEO of Fairplay AI, in a separate interview. “But if you pay attention to the statements coming out of the federal regulators, there also now seem to be concerns about digital marketing and fraud.”

This means more layers of potential scrutiny of fintech providers in areas where AI is being applied such as customer outreach, Saleh said. 

“I think that is a big consequence of this move toward alternative data and advanced predictive models,” Saleh said. “As those systems are being used at more and more touchpoints in the customer journey, we’re seeing fair lending risks and obligations grow commensurately.”

It’s scrutiny that could apply to servicers as well as originators, as use cases for AI to determine settlements, modification offers or what customers to call, when, and how often emerge, according to Saleh.

What some new dimensions of risk look like
To get a sense of where AI and fair lending rules veer into areas like marketing regulation and potential fraud allegations, consider the following examples. While these lie outside the traditional owner-occupied single-family mortgage market, the situations involved are applicable.

One cautionary tale to be aware of when it comes to compliance for generative AI, a type of machine learning that draws on existing data it’s fed and patterns within it to create new outputs, was an Air Canada chatbot. (Several other airlines have used chatbots as well.)

That chatbot produced a response to a consumer asking about a bereavement discount in 2022 that was a “hallucination,” which is to say the AI somehow interpreted the airline’s data in such a way that it made an offer that didn’t previously exist at the airline and that it didn’t intend. Earlier this year, the British Columbia Civil Resolution Tribunal forced the airline to make good on the offer.

In the United States, that kind of development might lead to violations of laws against unfair, deceptive or abusive acts or practices, Shinohara said.

“I think those would equate to UDAAP concerns if there was something that was provided and was inaccurate, raising questions about whether the company is still on the hook for those types of miscommunications,” Shinohara said.

The Consumer Financial Protection Bureau, Office of the Comptroller of the Currency and other prudential regulators enforce UDAAP, and the Federal Trade Commission enforces laws against unfair or deceptive acts and practices, which might also be relevant in such a circumstance.

Meanwhile, exemplifying the kind of new scrutiny of fair lending risks that might arise when AI gets used for marketing purposes is a recent missive the Department of Housing and Urban Development delivered to real estate agents and lenders.

HUD directed them to “to carefully consider the source, and analyze the composition, of audience datasets used for custom and mirror audience tools for housing-related ads” in conjunction with rules for AI-driven advertising rules and tenant screening. 

Demetria McCain, principal deputy assistant secretary fair housing and equal opportunity, warns in a related press release that “the Fair Housing Act applies to tenant screening and the advertising of housing,” suggesting that officials are watching any customer outreach and approvals in this area for signs of redlining.

Marketing may currently be the bigger concern of the two for housing finance companies in the single-family owner-occupied market.

For now, qualifying borrowers or other core processes are determined primarily by major government-related secondary market players, so mortgage companies in that business are most likely to relegate AI and any related compliance efforts to customer outreach, according to Shinohara.

“I think there’s more focused interest on adopting AI or machine learning tools for things like marketing and how you make your marketing dollars go further. In action with marketing, you run into risks, like digital redlining,” she said. “If you’ve got tools that are being used to select who you’re going to market to, and you are marketing credit products, you should look at whether those tools inadvertently exclude or only give preference to certain communities.”

The path to compliant use of AI
The aforementioned examples of new scrutiny applied to AI-driven tools do raise a key question about whether newer technologies like generative AI are helping to better address inequities that exist than their predecessors, or are further entrenching systemic biases.

“On the one hand, some of the disparate outcomes are likely the result of non-AI models, so you’ve kind of got a modernization issue,” Saleh said. “But also behind some of the disparities are AI issues which basically encode the disparities that were the result of the conventional techniques to begin with, and so it’s a very interesting time to be doing this work.”

AI could be viewed as a constructive force in a lot of the advanced data analysis the government-sponsored enterprises are doing with the aim of safely opening up the underwriting or marketing box in ways that could make lending more equitable.

“In theory, that should allow you to paint a kind of a finer portrait of a borrower, or the ability and willingness to repay a loan,” Saleh said. 

But with AI currently relegated to limited use in conjunction with the customer experience and other challenges to qualifying for a loan existing in the market, applying AI to the point where it allows lenders to actually extend more loans to more people in an equitable manner is tricky.

“There are a lot of headwinds to write related to affordability in particular. So it’s a tough time to do fair lending, because on the one hand, you’ve got more resources than ever on the other hand, the macroeconomic environment is kind of working against you.”

How to address ‘the compliance officer’s lament’
When asked how a mortgage company can best address the aforementioned challenges, Saleh said, “This is the compliance officer’s lament, which is what do you want me to do? If I don’t do things exactly to the letter, am I going to get in trouble?”

Doing things to the letter may not even be possible, because the regulators themselves face a conundrum when it comes to giving companies guidance that’s too specific.

“There have been a lot of requests from the industry for more guidance and I think in some ways, the regulators have wanted to give more guidance. However, in other ways, they’ve been reluctant because they want to maintain their optionality,” he added. “They’re concerned that if they give guidance that’s too specific that people will game the system.”

So the industry is left to navigate what Saleh calls a “strategic ambiguity.”

“The thing about judgment is that you can always be second guessed, but if you can document that you take fairness seriously and why you feel the approach you’ve chosen doesn’t pose a threat to the consumers that you serve, I think that is your best option,” Saleh said.

Because legacy data that fuels generative AI may be biased and its outputs have to be watched for hallucinations, the answer to how to make it a constructive and compliant tool may be ongoing monitoring, a phrase common in consent orders.

The approach is in line with what mortgage companies that offer chatbots have said they’ve done to address the risks.. Instamortgage, for example, has said it limits possible interactions and constantly monitors the company’s personified chatbot, Rachel.

Saleh suggests applying analytics that may be AI-driven and can be examined on a regular basis such as monthly to the problem, perhaps even more frequently where unpredictable generative models are utilized.Although the aforementioned ambiguity from regulators and the opt-in nature of borrower information around race can make it be hurdles to interest in building the kind of robust fair-lending data sets that AI has the capacity to help ingest, Saleh advises doing so. He also advised keeping in mind that regulators generally want an understanding and explanation of any model used, no matter how complex it is, as HUD noted in its aforementioned directive.

“Have the benefit of evidence that’s informed by data so that you can comply and explain,” Saleh said.

Adjustments may not be necessary each time the statistics get examined as aberrations may occur in the short-term. But if counterproductive rather than productive patterns start to appear regularly in analyses, they need to be addressed, he said.

“I think a key part of what originators can do to navigate this environment gets back to saying, ‘Hey, we’re going to monitor frequently to make sure that these models and our decisions are performing reasonably and don’t pose a threat to consumers,” Saleh said.

Source: nationalmortgagenews.com

Apache is functioning normally

The Consumer Price Index (CPI) has done more than any other report to shape trends in the bond market in the past year.  At times (such as the middle and end of 2023), CPI provided hope that inflation was moving back down to target levels.  At other times, such as Q1 2024, it’s suggested a troubling resurgence of elevated inflation.  This week’s installment isn’t exactly in a position to put any debates to bed.  If it’s higher than expected, it would suggest the market continues waiting for better evidence of a shift.  But if it’s lower than expected, traders will increasingly view Q1 as the last unexpected push before a better chance at a turning point. With the Fed out with a new dot plot that same afternoon, there’s a lot at stake this week, but you wouldn’t necessarily know it based on the slow, sideways trading in place at the start.

Today’s only potentially relevant calendar item is the 3yr Treasury auction at 1pm.  Shorter term auctions are less likely to cause a reaction, but it’s not out of the question. 

Source: mortgagenewsdaily.com