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The Appraisal Foundation has settled the “secretary-initiated” complaint with the Department of Housing and Urban Development over fair lending practices, including creating a $1.22 million scholarship fund.

HUD’s press release describes the conciliation agreement as historic, resolving a complaint “alleging discriminatory barriers preventing qualified Black people and other persons of color from entering the appraisal profession on the basis of race in violation of the Fair Housing Act.”

The Appraisal Foundation’s announcement about the settlement emphasized that the investigation process started in December 2021 did not result in any findings.

“We are pleased to have reached this conciliation agreement,” recently appointed Appraisal Foundation President Kelly Davids said in the group’s press release. “We appreciate HUD’s recognition of our proactive efforts to lead the appraisal profession to welcome a new, diverse generation of appraisers and their support of our forthcoming scholarship program to aid new entrants to the field.”

HUD’s comments focused on the lack of diversity in the appraisal profession and the Foundation’s role in that, namely its experience requirement, where a friend or family member who is already a licensed appraiser has to be willing to supervise as the applicant gains on-the-job experience.

“The lack of diversity within the appraiser workforce can contribute to patterns of mis-valuation in communities of color,” HUD press release quotes the Interagency Task Force on Property Appraisal and Valuation Equity as commenting. It cites Bureau of Labor Statistics data that states the industry is 94.7% white.

Yet the agreement declares “Respondent denies that the Appraiser Qualification Criteria has caused or resulted in any violation of the Fair Housing Act, but agrees to enter into this Conciliation Agreement to conclude the Investigation.”

It has a three-year term, set to expire on July 9, 2027.

“To help eliminate racial and ethnic bias from home appraisals, we must ensure that the industry looks like America,” HUD Acting Secretary Adrianne Todman said in the agency’s release. 

“Today’s historic agreement will help build a class of appraisers based on what they know instead of who they know. This settlement will help bring us one step closer to rooting out discrimination in housing and opening doors to opportunity for all,” she added. 

Under the agreement, the Foundation is creating a $1.22 million scholarship fund, which will cover the cost of aspiring appraisers to attend Practical Applications of Real Estate Appraisal programs, an alternative pathway to fulfill the experience requirement.

Details, including eligibility and how to apply, will be shared when the program is formally announced, the Foundation press release said.

The Appraisal Foundation has been in the crosshairs of the head of another member agency of the Federal Financial Institutions Examination Council, Director Rohit Chopra of the Consumer Financial Protection Bureau.

Chopra penned a letter after the PAVE report came out in March.

“These issues are deeply troubling as the Appraisal Foundation is one of the most — if not the most — powerful players in America when it comes to appraisals and plays a controlling role in key issues contributing to appraisal bias,” Chopra wrote. “As long as the Appraisal Foundation remains an insular body controlled by a small circle, operating behind closed doors, those issues will continue to go unaddressed.”

Source: nationalmortgagenews.com

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The Producer Price Index (PPI) is certainly not in the same league as CPI when it comes to bond market impact, but there have been several notable reactions in the past year.  It was a concern, then, to see core PPI come in 0.2 higher than expected and for last month to be revised 0.3 higher.  But while there was an initially negative reaction in the bond market, it wasn’t big and it didn’t last long. The “why” has to do with the components of PPI that directly impact the more important consumer inflation metrics like the PCE price index coming out later this month. Simply put, the big beat in PPI was driven by categories that don’t translate to PCE.  

Source: mortgagenewsdaily.com

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Average mortgage rates were mostly lower compared to a week ago, according to Bankrate data. Rates for 30-year fixed, 15-year fixed and jumbo loans each decreased, while rates for ARM loans rose.

Rates last updated July 12, 2024.

The rates listed above are marketplace averages based on the assumptions shown here. Actual rates displayed on-site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Friday, July 12th, 2024 at 7:30 a.m. ET.

Market mortgage rates constantly change as the economy ebbs and flows, new data releases and lenders decide how much risk they’re willing to tolerate on a given day.

Historical mortgage rates: How do today’s rates compare to years past?

Thirty-year fixed mortgage rates remain around 7 percent mostly due to inflation, which has run hotter than the Federal Reserve’s 2 percent target for some time now. Those higher prices have prompted the Fed to keep the federal funds rate elevated.

“Inflation data will be the catalyst for movement in mortgage rates this summer,” says Greg McBride, CFA, chief financial analyst for Bankrate.

The Fed’s rate doesn’t outright determine fixed mortgage rates, however. Rather, they increase or decrease with the 10-year Treasury yield, the effective yield rate on 10-year Treasury notes. The 10-year yield rises when there’s less demand for notes — and this tends to happen when investors feel confident in the economy, including monetary policy.

Still, real life doesn’t necessarily consider the Fed, inflation and yields. If you’re in a position to buy or sell a home now, it might be better to make a move than try to wait out the market. Wherever prevailing rates are, shop lenders to help uncover the best deal.

30-year mortgage rate falls, -0.14%

The average rate you’ll pay for a 30-year fixed mortgage today is 6.94 percent, down 14 basis points from a week ago. Last month on the 12th, the average rate on a 30-year fixed mortgage was higher, at 7.01 percent.

At the current average rate, you’ll pay $661.28 per month in principal and interest for every $100,000 you borrow. That’s $9.40 lower, compared with last week.

15-year mortgage rate declines, -0.12%

The average rate you’ll pay for a 15-year fixed mortgage is 6.41 percent, down 12 basis points since the same time last week.

Monthly payments on a 15-year fixed mortgage at that rate will cost approximately $866 per $100,000 borrowed.

5/1 ARM rate moves up, +0.07%

The average rate on a 5/1 ARM is 6.59 percent, rising 7 basis points over the last week.

Monthly payments on a 5/1 ARM at 6.59 percent would cost about $638 for each $100,000 borrowed over the initial five years.

Jumbo loan interest rate retreats, -0.10%

The average rate you’ll pay for a jumbo mortgage is 7.04 percent, a decrease of 10 basis points since the same time last week. Last month on the 12th, jumbo mortgages’ average rate was greater than 7.04 at 7.15 percent.

At today’s average rate, you’ll pay principal and interest of $667.99 for every $100,000 you borrow. That’s down $6.74 from what it would have been last week.

30-year mortgage refinance trends down, -0.17%

The average 30-year fixed-refinance rate is 6.94 percent, down 17 basis points since the same time last week. A month ago, the average rate on a 30-year fixed refinance was higher at 7.01 percent.

At the current average rate, you’ll pay $661.28 per month in principal and interest for every $100,000 you borrow. That represents a decline of $11.43 over what it would have been last week.

When will mortgage rates go down?

Thirty-year mortgage rates could slip under 7 percent by end of year, according to Bankrate’s July 2024 forecast.

There won’t be a meaningful drop beyond that, however, if the economy continues its strong streak.

“Even if the Fed starts cutting rates this year, mortgage rates won’t get down to, or below, 6 percent unless there is a significant economic slowdown,” McBride says.

More on current mortgage rates

Methodology

Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).

The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.

Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.

Source: bankrate.com

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Default servicing experts have been optimistic that affordability concerns will be mild this year, but they consider some of the pressures on homeowners more worrisome than others.

When asked to distribute 100 points of risk among delinquency triggers, respondents to a recent Auction.com survey collectively assigned the greatest share of risk, at 37 points, to the “hidden” housing costs of property taxes and insurance.

Home purchasers often are most focused on upfront price and financing costs when they buy, so they can sometimes overlook ongoing expenses like T&I. That’s a concern for servicers, who often bear some responsibility for helping consumers manage these costs.

“Although the risk of rapidly rising delinquencies in the near term remains low, there are some signs of consumer and homeowner stress emerging,” Daren Blomquist, vice president of market economics at Auction.com, said in a report on the second quarter survey.

The online real estate marketplace surveyed a group of experts from depositories, agencies, government-sponsored enterprises, nonbanks and asset owners/investors for the survey. Auction.com found the first two groups to be particularly concerned about T&I.

Banks, government agencies and GSEs assigned 40 points of risk to taxes and insurance, in contrast to nonbanks, 34; and asset owners/investors, 25.

In addition to T&I, other concerns survey respondents collectively ranked highly included delinquencies rising in consumer debts outside the home loan market, 32; followed by rising unemployment, 15; commercial mortgage defaults, 10; and falling home prices, 6.

While these findings show there are a number of active performance concerns in the market, other answers to the survey explain why most respondents expect them to be mild.

Their projections suggest unemployment, which was pegged at 4.1% in the latest jobs report, will remain historically low. 

Over three-quarters of respondents expect home price gains to persist throughout 2024.

As a result, survey participants anticipate high home equity levels that support performance, with serious-delinquent loans having an average combined loan-to-value ratio of 65%.

(Lower CLTVs reflect higher equity levels, and the traditional tolerance for higher ratios at origination is a maximum of 80%; but there are many risk-management vehicles designed to accommodate lower down-payments and elevated ratios above that level.)

Equity levels may shift over time, but right now respondents expect more than half or 51% of loans in loss mitigation to return to performing status given where they stand, with some typical adjustments for different types of mortgages.

Expectations are that 58% of loans purchased by government-sponsored enterprises Fannie Mae and Freddie will return to performing status after going through loss mitigation, followed by a little less than half government insured products at 49%, and 34% for non-agency mortgages.

The survey pegs the average combined LTVs for the different product types as follows: Fannie and Freddie loans, 58%; government insured mortgages, 49%; and non-agency products, 74%. 

Around two-thirds or 67% of all respondents expect a rise in foreclosures to materialize this year.

More than half of the total, or 57%, anticipate foreclosures will increase 1% to 4% for their companies. Only 10% of the total project a foreclosure increase of 5% to 9%, with another 10% forecasting a drop of 5% or more. The rest of respondents anticipate foreclosures will either remain stable or decline by no more than 4%.

Survey participants in the non-agency market were unified in expectations that foreclosures will rise, with two-thirds anticipating an increase in the 1% to 4% range, and others anticipating a jump of 5% to 9%.

Source: nationalmortgagenews.com

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No New Inspiration Ahead of Thursday’s CPI

By:
Matthew Graham

Wed, Jul 10 2024, 4:04 PM

No New Inspiration Ahead of Thursday’s CPI

We’ve officially run out of ways to characterize the boring, sideways grind in the bond market that’s been intact since last Friday afternoon.  One would think that with Fed Chair testimony and a Treasury auction cycle that we’d at least some moderate volatility, but alas!  Perhaps the market is saving it all for Thursday’s CPI.  For those that have to know what happened today, there was a 10yr Treasury auction.  It was well-received but not stellar enough to inspire any new buying.  Fed Chair Powell reiterated the same messages as yesterday and markets cared even less.  As always, CPI means rates could go either way, in a big way.

10:06 AM

Modestly stronger overnight but giving back some gains into the 10am hour.  MBS up 1 tick (0.03) and 10yr down 1.2bps at 4.285.

01:06 PM

10yr auction was pretty good.  No major reaction.  10yr down 1.8bps at 4.278.  MBS up 3 ticks (.09).

03:54 PM

Flat and boring all  day.  10yr down 1.8bps at 4.279.  MBS up 2 ticks (.06).

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

Source: mortgagenewsdaily.com

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Sign in the window of a mortgage lender’s office in Lake Oswego, Oregon. 2020.

Anyone shopping for a house can attest that mortgage rates remain high in the U.S. In June 2024, the 30-year fixed rate mortgage rate was around 6.9 percent. For comparison, it was around 3.6 percent in January 2019, just prior to the pandemic. Will mortgage rates come down from their current high levels? While no forecast of the future can be certain, lower mortgage rates are in fact quite likely.

Given recent monetary policy, it is reasonable to think that inflation will eventually return to two percent per year, or at least to the neighborhood of two percent. Current short-term Treasury rates are about 5.25 percent per year. With inflation at 2 percent, a 5.25 percent nominal Treasury bill rate would imply a historically very high real Treasury rate—that is, the Treasury rate net of inflation. Not that long ago, the real rate on Treasury bills was negative. The real rate on Treasury securities is temporarily high due to the Federal Reserve’s policy goal of lowering the inflation rate.

Inflation is down substantially from two years ago. The Personal Consumption Expenditures Price Index grew 2.6 percent over the twelve month period ending May 2024. It grew 6.7 percent over the twelve month period ending May 2022. There is no indication that inflation will increase and, given the Federal Reserve’s determination so far, it is reasonable to think that the inflation rate will settle down somewhere between 2 and 3 percent per year, if not at 2 percent. Given a historical average real rate on short-term Treasury bills near zero, the short-term Treasury rate is likely to be in the neighborhood of 3 percent.

If short-term Treasury rates decrease, why would housing mortgage rates decrease? Part of the reason is because long-term Treasury bond yields will decrease. Long-term Treasury rates reflect expectations of future short-term rates; lower expected future short-term rates lower long-term Treasury rates. Lower long-term Treasury rates will result in lower long-term mortgage rates, but that is nowhere near all the story.

Figure 1 shows the 30-year mortgage rate and the 10-year Treasury yield separately. Figure 2 shows the spread, or difference, between the two. The 10-year Treasury yield commonly is used for comparisons to mortgage rates because the actual terms of mortgages are shorter than 30 years and because the 10-year Treasury security is traded more frequently than 30-year Treasury securities, making its price and yield more informative.

The 30-year mortgage rate and the 10-year Treasury yield have both increased since 2020, but the increase in the spread is quite notable. The spread can be interpreted as a risk spread, because Treasury securities are risk free in terms of paying the promised number of dollars. (They are nominally risk free but not really risk free.) Why has the risk spread increased?

A risk lenders face is the risk of prepayment of the mortgage. Prepayment of the mortgage is a risk because it generally is associated with the borrower purposefully refinancing the mortgage to obtain a lower interest rate. That lower interest rate for the borrower also is a lower interest rate for the lender if the lender replaces the refinanced mortgage with another mortgage.

Prepayment risk is the largest single risk for lenders. When, as now, interest rates are temporarily high, prepayment risk on new mortgages is high because rates are likely to be lower in the future, which will make it profitable for borrowers to refinance at those lower rates. Effectively, the expected terms of mortgages decrease.

Another risk frequently mentioned, foreclosure due to a recession, actually doesn’t create a risk for lenders. The large majority of mortgages in the United States are guaranteed by the federal government agencies popularly known as Fannie Mae, Freddie Mac and Ginnie Mae. If a borrower defaults, the federal agency guaranteeing the mortgage pays off the mortgage and absorbs the loss after the home is foreclosed and sold. Voila, default risk doesn’t matter to lenders!

Foreclosure creates a different risk, though, than default risk and loss. Foreclosure of a mortgage backed by the Federal government results in prepayment. Default still is a risk but it is not a risk of loss; it is a risk of prepayment. Even if the foreclosure is not motivated by a relatively high interest rate, the lender always has the risk that the rate will be lower on another mortgage it might acquire to replace the foreclosed mortgage. 

Prepayment is not the only risk associated with mortgages. The Federal Reserve acquired a very large portfolio of mortgages as part of its policy of Quantitative Easing. Mortgages are bundled into securities called Mortgage Backed Securities (MBSs) which can be traded after the mortgages are issued. For some time, the Federal Reserve was acquiring amounts of MBSs equal to the new issues of mortgages. The rationale of these purchases was to lower mortgage rates. While not unequivocal, statistical evidence indicates that these purchases did lower mortgage rates.

The Federal Reserve now is selling MBSs as it unwinds Quantitative Easing. These sales account for some part of the increase in the mortgage rates and in the spread between the mortgage rate and the yield on Treasury securities.

Lower long-term Treasury rates and lower spreads in the near future will translate into lower mortgage rates. A lower-inflation environment will be associated with lower short-term interest Treasury rates if the Federal Reserve continues pursuing its current policy of lowering the inflation rate. Lower short-term interest rates will translate into lower long-term rates because long-term rates will reflect expectations of these lower short-term interest rates. These lower interest rates will create prepayments but will lower the risk of future prepayments, causing the spread between mortgage and Treasury rates to decline. In addition, the Federal Reserve eventually will stop selling MBSs, which also will lower the spread. In sum, mortgage rates will decrease because of lower inflation and lower risk-free interest rates, less prepayment risk and fewer sales of MBSs by the Federal Reserve.

Gerald P. Dwyer

Gerald P. Dwyer is a Professor and BB&T Scholar at Clemson University. From 1997 to 2012, he served as Director of the Center for Financial Innovation and Stability and Vice President at the Federal Reserve Bank of Atlanta. Dwyer’s research has appeared in leading economics and finance journals, as well as publications by the Federal Reserve Banks of Atlanta and St. Louis. He serves on the editorial boards of the Journal of Financial Stability, Economic Inquiry, and Finance Research Letters. He is a past President and member of the Executive Committee of the Association of Private Enterprise Education. He is also a founding member of the Society for Nonlinear Dynamics and Econometrics, an organization for which he served as President and Treasurer.

Dwyer earned his Ph.D. in Economics at the University of Chicago, his M.A. in Economics at the University of Tennessee, and his B.B.A. in Business, Government, and Society at the University of Washington.

Get notified of new articles from Gerald P. Dwyer and AIER.

Source: aier.org

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A federal appeals court ruled in favor of the Consumer Financial Protection Bureau that brought an enforcement action against a Chicago mortgage lender, Townstone Financial, after its president made disparaging remarks about Blacks and Hispanics in a radio infomercial.

Ting Shen/Bloomberg

A federal appeals court ruled that the Consumer Financial Protection Bureau has broad authority to discourage discrimination to combat redlining, delivering a major victory to the bureau in a contentious case, CFPB v. Townstone Financial, against a Chicago mortgage lender.

A three-judge panel of the U.S. Court of Appeals for the 7th Circuit ruled that the Equal Credit Opportunity Act applies not just to credit applicants but also to prospective applicants.

The CFPB filed a redlining lawsuit against Townstone Financial in 2020 alleging that the company’s CEO Barry Sturner made disparaging remarks about Blacks on a talk-radio infomercial that discouraged minorities from applying for home loans. At issue in the case was whether Sturner had discouraged Black prospective applicants from applying for mortgage loans with Townstone, in violation of ECOA and Regulation B — which prohibits creditors from discriminating on the basis of sex, race, color, religion, national origin, age or marital status.

Congress had indicated that the law must be construed broadly to serve the purpose of ending discrimination in credit applications, the judges said. 

“An analysis of the text of the ECOA as a whole makes clear that the text prohibits not only outright discrimination against applicants for credit, but also the discouragement of prospective applicants for credit,” the judges wrote in a 15-page opinion. “When the text of the ECOA is read as a whole, it is clear that Congress authorized the imposition of liability for the discouragement of prospective applicants. Regulation B’s prohibition on discouraging prospective applicants is therefore consistent with the ECOA’s text and purpose.”

The CFPB had cited as evidence of discrimination comments that Sturner made on the radio commercial in which he described a Jewel-Osco grocery store as “Jungle Jewel,” and claimed the South Side of Chicago between Friday and Monday was “hoodlum weekend.”

The CFPB had identified five instances in which Sturner and other hosts made statements that would discourage Black prospective applicants from applying for mortgage loans. In addition, the bureau alleged that from 2014 to 2017, Townstone received fewer mortgage applications from Black applicants, fewer mortgage applications for properties in neighborhoods with a high-Black population and fewer mortgage applications for properties in neighborhoods with a majority of Black residents.

Last year, the United States District Court for the Northern District of Illinois dismissed the case in the favor of Townstone by focusing on ECOA’s definition of a credit applicant. The lower court also rejected the CFPB’s argument that its enforcement and rulemaking authority allowed it to prohibit discouragement of prospective applicants. The CFPB appealed.

“The district court held that the ECOA does not authorize the imposition of liability for the discouragement of prospective applicants. We take a different view,” the judges wrote. 

“The term “applicant” cannot be read in a crabbed fashion that frustrates the obvious statutorily articulated purpose of the statute,” the judges wrote. “Indeed, the ECOA’s scope of prohibition prohibits discrimination ‘with respect to any aspect of a credit transaction.’ ”  

The case was reversed and remanded back to the district court. 

“Discouraging applicants is the first tool in the book of redlining. A discriminatory lender may feel like using a ‘Whites Only’ sign is the best way to accomplish their goal,” said Adam Rust, director of financial services at the Consumer Federation of America. “I think it was common sense to read the law and come to this conclusion.”

The CFPB did not immediately respond to a request for comment. 

The Pacific Legal Foundation, which represented Townstone, had argued that Sturner was protected under the First Amendment.

“We’re disappointed in the decision, which offered only a cursory analysis of the relevant statutes and ignored completely Townstone’s First Amendment arguments,” the public interest law firm said in a statement. “We are considering our options for further review.”

Townstone may appeal the case to the full 7th Circuit or to the Supreme Court, experts said.

Source: nationalmortgagenews.com

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The most recent sideways slide began just before noon last Friday.  Bonds had rallied in response to the jobs report with 10’s closing at 4.29%.  Since then, there hasn’t been more than 4bps of movement in either direction, and the range has been even narrower 95% of the time.  Part of the reason is the absence of new inspiration.  Since the jobs report, there haven’t been any massively actionable economic reports or calendar events.  Today’s calendar is similarly light.  The 2nd day of Powell testimony is unlikely to offer any new insights and the 10yr Treasury auction–while a bit of a wild card for short term volatility–won’t impact the big picture with the all-important CPI on deck tomorrow morning.

Source: mortgagenewsdaily.com

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Mortgage rates fell in the week ending July 11, with fixed rates seeing their largest week-over-week drop since May.

The 30-year fixed-rate mortgage averaged 6.77%, down 17 basis points from the previous week’s average, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

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Source: sanfordherald.com

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United Wholesale Mortgage has rolled out a series of products, most recently announcing one that aims to incentivize borrowers with Federal Housing Administration and the Department of Veterans Affairs-backed loans to refinance.

The product, dubbed Govy125, is a 125 basis point incentive on any note rate for VA IRRRLS and non-credit qualifying FHA streamlines. The wholesale lender giant says the “incentive aims to help UWM partners create more refinances with their past VA and FHA borrowers, as well as attract new clients.”

“Govy125 pricing will help more borrowers secure a lower rate and save money on their monthly payments at a time when they may not have thought possible,” it noted in a press release.

In order to qualify, broker partners must use UWM’s Title Review and Closing plus, or TRAC+, which lets the wholesale lender handle title reviews, closing and disbursement for a flat $1,850 fee. Clients who use the TRAC+ service “receive up to an additional 60 basis points for a total of up to 185 basis points,” UWM said.

Another way to use the product is to sign up for PA+, a service that provides a UWM coordinator to work with the LO and borrower to help a loan clear.

“Govy125 is designed to help you expand your reach, grow your business and wow your borrowers,” the wholesale lender touted. The product is available on new locks from July 10 to Sept. 3.

The new incentive comes after UWM rolled out a number of other initiatives including its 0% down payment mortgage product and TRAC+  in mid-May.

Its 0% down program has received some mixed reviews, with a recent media analysis calling the mortgage a “red flag” akin to the risky home loans which caused the Great Financial Crisis. The wholesale lender has defended its product, arguing that it’s a tool that can make it easier for borrowers to become homeowners.

Source: nationalmortgagenews.com