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And what is Better.com best at?

According to Garg, the company has developed a one-day mortgage product that provides a commitment letter within 24 hours. It is possible, said Garg, because of Tinman, a platform that interacts directly with the customer — meanwhile, in other platforms in the market, a human extracts information from borrowers, he said. 

Better wants to sell this platform to other companies, becoming a “mortgage-as-a-service” company or a white-label provider of mortgage tech, Garg said. When asked how relevant this business will be, Garg refers to Amazon, a company that drives two-thirds of its sales from third-party sellers. “We aim for a similar mix.”

It took Better two years to go public. The transaction will result in an infusion of up to $750 million from sponsors Novator Capital and SoftBank. The business combination closing, announced Wednesday, unlocks approximately $565 million of fresh capital, including a $528 million convertible note previously committed from affiliates of SoftBank and additional common equity from funds affiliated with NaMa Capital (formerly Novator Capital).

The company went from a $500 million profit and 11,000 employees in 2020 to only 950 employees by June 2023. It incurred an $89.9 million loss in the first quarter of 2023. During this period, Better faced the deterioration of the mortgage market due to surging rates, along with the fallout from bad press after Garg laid off employees via Zoom in December 2020. 

Garg said the company has come a long way from that episode. “I’ve gone through extensive coaching and professional development,” he said. “Better is a much more mature company, and I’m a much more mature and empathetic leader than I was.”

Garg offered his views on the company’s IPO strategy in an interview with HousingWire at Better’s New York office.

This interview has been condensed and edited for clarity.

Flávia Nunes: Better took nearly two years to go public, with Aurora’s shareholders’ merger approval extended three times. What happened, from your standpoint? 

Vishal Garg: I can’t comment on the process at the SEC. But all I can say is that it was worth it. In that time, the market, the industry and the consumer changed dramatically. We went from the lowest interest rates on record to the highest interest rates on record in the past 20 years, from great housing supply to the most constrained housing supply in many years. We’ve just worked hard to address all of these challenges head-on.

Nunes: The transaction will infuse the combined entity with $750 million in new capital. How will Better use these resources? And what role will SoftBank play?

Garg: The first thing is: we’re going to be very prudent because we’re still in a very bad macroeconomic climate for mortgages and housing in general. Secondly, we are going to continue to invest in our technology and drive products, like One Day Mortgage, that are innovative and groundbreaking and drive the adoption of those products across the industry.

[SoftBank] will be a significant shareholder—no seats on the board. Being public means I have to answer to a whole new set of shareholders, which we’re happy to welcome, and other than that, we will drive innovation and growth.

Nunes: How is Better prepared for the scrutiny of being a public company? 

Garg: We’ve had a lot of scrutiny from external sources. We passed our first CFPB exam with really great results. We have been subject to multiple Fannie Mae audits, all with great results. We generally have viewed our ability to have a technology platform where the technology makes the decisions rather than people making the decisions, and technology creates tasks for the consumer rather than people creating paths for the consumer. That technology platform has helped us maintain best-in-class compliance and regulatory audits. We’ve made a substantial investment in those systems, and we continue to believe they’re going to help yield great results as we’re a public company.

Nunes: Better was a very efficient refi shop during the Covid years when rates were historically low. How can Better succeed in a purchase market? 

Garg: It took us six years to do $100 billion of refinances and to build an industry leader in refinances. Over the past two years, we’ve had to pivot very hard so that 90% of our business is purchase mortgages. To do purchase mortgages, we knew it was not enough to just be cheaper, because Better could save consumers money on their mortgage versus the MBA [Mortgage Bankers Association] average, but we had to be faster and easier to use.

We’ve done that through products like One Day Mortgage, which are helpful to a consumer if they’re buying or shopping for a home because literally the same day that they enter into a purchase contract, they can get a commitment letter on their mortgage. We believe that the innovation, which we launched earlier this year, has yet to really play itself out in the mortgage industry. As we get widespread adoption of One Day Mortgage, we will be able to grow our purchase volumes dramatically, [much] in the same way that we did our refinance volumes.

Nunes: But how is Better building relationships with real estate agents, financial planners, and other professionals, who can help you get more customers and win in the purchase market? 

Garg: The bulk of leads are actually generated from the internet. We’ve been able to consistently get that cost of acquisition down, such that the internet is now a viable source of customer acquisition for us. We’ve always been very good at direct customer acquisition and reaching consumers directly. We’ve always had the ability to get consumers from direct advertising. 

But more recently, we have partnered with Realtors. As you know, we took our in-house BRE [Better Real Estate LLC.] operation, deprecated it, and launched a partnership operation with Realtors. We’re partnering with Realtors, we’re helping Realtors win new business and get new business by referring Better’s customers who don’t have a Realtor to those realtors, and then also helping realtors understand the power of One Day Mortgage and how it can speed up the mortgage process.

Nunes: What is the rationale behind the change at Better Real Estate, pivoting from in-house licensed professionals to a partner agent model?

Garg: We had to shut down our in-house division, and with that came the associated layoffs. When we had agents, we were not large enough to provide the consumer full coverage [geographically]. Honestly, our in-house platform was not nearly as efficient as some of the best agents in the country. 

Our overall model has changed from being a one-stop-shop, where we do everything in-house, to being a one-stop-shop where we do the things in-house that we’re the best at. With One Day Mortgage, we are the best at delivering a fast response to a consumer along with an industry-leading price. 

For things like homeowner’s insurance, title insurance, and realtors, we’ve now just become a marketplace. We match the consumer with a partner capable of delivering the best product to them. So, we ended [Better Real Estate] for the sake of efficiency and savings for the consumer. We partner with best-in-class agents, insurance companies and title companies.

Publicly, we’ve gone from over 11,000 people to about 1,000 people. Along that journey, we have become much more efficient. 

Nunes: Better rolled out the “One Day Mortgage” in January. What is the share of clients getting a mortgage commitment letter within 24 hours? What are the challenges for the product?

Garg: I’ll be able to tell you that soon. All I can tell you is One Day Mortgage has been an amazing lever for our customers, and customer adoption has been off the charts.

The biggest challenge initially was reengineering the entire process of tasking out to the consumer, getting their income, getting their assets, and figuring out which of their debts they might be paying off. All of those things are processes built to begin in the old mortgage process to be weeks long because of the overall process of 60 days that it took to close a mortgage. 

Now, if you say to a consumer, ‘I’m going to give you a commitment letter in one day,’ all of those sequential processes have to be parallel processes. [So this] can’t be done by humans. The machine has to do all of them.

The other thing we have to do is use technology to predict which customers can qualify for  One Day Mortgage based on just the data that’s in their pre-approval. The first job is predicting which customers might be able to be qualified for this pathway, and the second step is then delivering the product within 24 hours.

Nunes: How has the company changed internally to offer One Day Mortgage?

Garg: We had to build an underwriting and processing operation that was 24/7, which is unheard of in the mortgage industry. We had to have the machine provide a lot of the steps —more of the steps than are traditionally done. Most mortgage companies use technology to collect data. We’re using technology to decide the data itself [that should be fed into it]. Our rules engine Tinman can]do all of that work of getting to a commitment letter and reduce the number of human touches involved. We have offices in New York, Charlotte, Irvine, and India.

Nunes: Last August, Better partnered with Palantir to create the proprietary loan platform you mentioned, Tinman Marketplace. What makes this technology competitive? 

Garg: The Tinman platform fundamentally differs from the traditional mortgage industry platform. The traditional mortgage industry platforms —like Encompass or Empower Pro — are more built around capturing data and storing data that humans extract. So, a human underwriter might extract from looking at someone’s paystub, what their income is, and then type that into Empower Pro or Encompass, and then use that along with other things to calculate the consumer debt-to-income ratio or other things.

Tinman interacts directly with the consumer; captures the data directly from the consumer; puts it into the calculation engine; figures out what their debt-to-income ratio is going to be; figures out which investors that the debt-to-income ratio is compatible with; routes it into those investor engines; and gets the appropriate pricing. If there’s anything that needs to change, it then automatically displays that to the consumer. So, it’s a very different process than a human entering and taking out data and then coming back to the consumer.

Nunes: How do you review the data customers are providing for accuracy?

Garg: We’ve built one of the largest training data sets in the industry. Anytime we have a rule change that we put into the system, we run it against all the loans that we’ve done previously to see if that rule was applied today, whether it would be consistent or not. This gives us a lot of comfort versus actual human underwriters. Our error rates are substantially lower than that of the rest of the industry as a result. I can’t disclose the error rates.   

Nunes: Does Better.com want to be more like an originator or a “white-label” platform, just like Blend?

Garg: Before the pandemic struck, we were on our way to doing that [white-label platform]. We had Ally Bank and American Express. With the pandemic, a lot of those efforts took a backseat. Now, you will see us leverage Tinman to be the mortgage platform of choice all the way to closing for a variety of banks. Now you hear a lot of the banks are getting out of the mortgage industry because it costs them too much to originate. We plan to offer the platform to many other financial institutions, mortgage lenders, and Realtors to use for mortgages as a service.

Nunes: How relevant will the white-label platform be compared to Better’s origination business?

Garg: If you think about a concept like Amazon, Amazon drives two-thirds of its sales from people who are leveraging the Amazon platform, third-party sellers, rather than running it through their own distribution warehouse. So, we aim for a similar mix.  

Nunes: What is your strategy with origination channels?

Garg: Right now, we have direct and partnerships, like Ally and Amex, large-scale private white-label partners. We have not done correspondent or TPO [third-party mortgage origination] yet. We are considering it. We have had conversations [with brokers], but I can’t give more details. If the consumer desires a local expert and wants to be handheld every step of the way locally, then a broker might make a better option than what we traditionally deliver today. So we’re thinking about that.

Nunes: What does the path to profitability look like?

Garg: First, we are in the worst mortgage market ever, in a very bad housing market, with a low housing supply. A lot of the issues that we are having today are a result of the macroeconomic environment. That being said, we have to continue improving our conversion rate, which will lower our customer acquisition cost and improve our efficiency,resulting in lower processing costs. 

Today, we are about 45 basis points cheaper than the industry average as of Q1. On a $400,000 mortgage, we’re about $1,800 a year cheaper. [We plan] to maintain price competitiveness. That means that we have less money to pay for all the things, and that requires us to be even more efficient in customer acquisition and the processes.

We always guaranteed to the consumer that we would either beat their rate or give them money. We’ve been involved in the price war. As many of the big players in the industry take a step back, that will improve profitability for everyone.

But I can’t say [when Better will be profitable]. 

Nunes: Would you consider M&A? 

Garg: To date, we’ve done three acquisitions, primarily in the U.K. We would be interested in acquisitions here in the U.S. that help us expand our footprint or the range of products that we offer to customers.

Nunes: When the layoff through Zoom happened in December 2020, the board ordered you to take a month-long break from your role, and you went through a mentoring process. Where are you and Better in the journey to recover from that episode? 

Garg:  Better is a much more mature company, and I’m a much more mature and empathetic leader than I was. I’ve gone through extensive coaching and professional development. With respect to where Better is, the consumers love Better, and we continue to have amazing customer experience scores, and customers come to our doors every day. While there was no other way that we could have done what we did with respect to the layoffs over Zoom, we believe that we’ve learned a lot from it. 

Nunes: Where is the mortgage market in the current cycle? Are we close to a market turn?

Garg: I don’t know when the next refi boom will happen. There was a story in Bloomberg about the economist of Goldman Sachs thinking that the first-rate cut is coming in June of 2024. But it’s completely unpredictable. We’ve never had an inflationary environment like what we’ve just had and coming out of it. 

Now that inflation is going down, we’ll see what happens — whether we have a hard or soft landing. What is going to be exciting for Better is that One Day Mortgage works well for purchase. One Day Mortgage works extraordinarily well for refinance. 

Nunes: What have you learned from the last refi boom?

Garg: We grew our headcount way too quickly. We underestimated how high the rate increases were going to be. This time, we’re going to do a much better job.

Source: housingwire.com

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We’ve all been waiting for news on the Home Affordable Refinance Program (HARP) front, and a nugget has finally arrived.

Unfortunately, it’s a bit of a mixed bag, depending on who owns your mortgage, and whether the words of a Treasury representative will actually amount to anything.

During a speech at the ABS Vegas 2014 Conference today, the Counselor to the Secretary of the Treasury for Housing Finance Policy Dr. Michael Stegman shed some light on the agency’s stance regarding the future of HARP.

He noted early in his speech that nearly three million homeowners have already received assistance through the popular mortgage refinance program, and that another two million are still HARP-eligible.

Additionally, he explained that the Treasury doesn’t believe the HARP eligibility date should be changed.

The cutoff date is currently May 31, 2009, meaning borrowers who took out loans after that date are not eligible for a HARP refinance, even if they’re currently underwater.

[HARP 2.1 Is Here! Fannie and Freddie to Use Note Date for Eligibility]

Yes, even borrowers who took out loans as recently as four years ago are underwater, depending on the region in which they purchased.

However, Stegman said “very few homeowners” with loans originated after the cut-off date are actually underwater and making changes “would do more harm than good by prolonging market and investor uncertainties.”

In other words, they’re not going to tinker with the program just to help a handful of borrowers who purchased homes at the wrong time. After all, it’s a choice to buy a home and you don’t get purchase protection if your property value declines.

Back before the latest housing crisis, those who didn’t buy at the absolute bottom simply had to wait for home prices to bounce back up. They didn’t just turn to the government months later to get some kind of concession.

Hope for a Refinance Program for Private-Label Mortgages

And now for the good news. Stegman also voiced concern regarding the absence of a large-scale underwater refinance program for private-label mortgages, those not backed by Fannie Mae and Freddie Mac.

Stegman pointed out that some communities are simply taking matters into their own hands by turning to eminent domain. He argues that a better path might be refinancing legislation.

So as the Treasury works to reform the housing finance system, it “will seek to ensure that neither the source of one’s mortgage nor who owns the credit risk should determine a borrower’s eligibility for refinancing or mortgage assistance.”

In other words, there could be expanded eligibility for HARP in the near future if legislators get off their seats and make it happen.

Even if it doesn’t happen with HARP initially, future mortgage assistance programs could encompass all types of loans, not just those backed by the GSEs.

Mortgage Forgiveness Debt Relief Act Extension

He also emphasized how important it is to extend the Mortgage Forgiveness Debt Relief Act, which expired at the end of last year.

Since 2007, homeowners who received principal forgiveness via short sales, loan modifications, and deed-in-lieu of foreclosures didn’t have to pay taxes on the amount forgiven.

If Congress doesn’t act soon, borrowers could be on the hook for the shortfall. The uncertainty could also push homeowners to foreclose instead of pursuing more beneficial outcomes.

Stegman called on Congress to extend the tax forgiveness immediately to clear up any doubt, instead of passing a tax extender late in the year and making it retroactive.

So that’s the latest housing policy news. Some good news, some bad, and a whole lot of uncertainty, per usual.

Source: thetruthaboutmortgage.com

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Sarah Jessica Parker has a great eye for fashion, and unsurprisingly, that translates into great taste in the home space. So when Etsy asked her to co-judge their 2023 Etsy Design Awards, alongside their trend expert Dayna Isom Johnson, we couldn’t help but stan this perfect partnership. The pair hand picked their favorite Etsy goods from 150 finalists (narrowed down from thousands of submissions from across the globe!), and winners received cash prizes, in addition to a bunch of other perks.  

Of course, with SJP in the picture, the grand prize winner had to be a fashion item (this stunning vegan cactus leather bag), but we were so delighted and excited by the cool home decor picks, we also felt the need to join in on celebrating these small makers and their handmade goods. After all, they’re SJP-approved, which makes them even more covetable!



Handmade Ceramic Planter with Chain

terrosostudios.etsy.com



We love the story behind this Etsy shop: The owner was originally from Syria and had an engineering degree. After relocating to Canada, he discovered his passion for pottery and began crafting his own ceramic pieces, inspired by ancient cultural techniques. We love how this planter has a drainage hole and a dish, two things that are annoyingly often missing from flower pots. (And it’s not lost on us that the chain is vaguely reminiscent of a handbag… Hi, SJP!) $137, terrosostudios.etsy.com



The Dandelion Interactive Lighting

mozidozen.etsy.com



This wildly innovative lighting piece (yes, it’s actually lighting) was technically selected by previous Etsy winners. Blowing on the dandelion’s “seeds,” or the felt portion, turns on the light! Because it’s battery-operated, it’s easy to transfer between rooms. It emits a pleasant, soft glow, which makes it the perfect nightlight. $191, mozidozen.etsy.com



Ifeoluwa Wall Art

dorcascreates.etsy.com



Super affordable, unique art?! Yes, please! This giclee print, illustrated by Dorcas Magbadelo, captures the beauty and strength of Black women, which is Dorcas’s mission with all of her art. And just like the other pieces, this one has a Yoruba name, which pays homage to Dorcas’s cultural identity. From $54, dorcascreates.etsy.com



1970s Glass Lounge Chair After Lenci by Adrian Pearsall

abtmodern.etsy.com



This chair made us swoon—and confirmed our prediction that the 70s are making a huge comeback. To be clear, it’s a vintage, one-of-a-kind piece, and it’s not cheap, but we love its inclusion in the awards because it highlights the sustainable direction consumers are headed; they’re buying more pre-loved treasures. It’s awesome for the planet! And this chair proves not everything vintage is dusty and sad. You really can find so many gems out there! $6,400, abtmodern.etsy.com



Custom Wood Portraits

texashoover.etsy.com



Continuing on the sustainability theme, this Etsy shop owner and artist uses his woodworking skills to repurpose lumber salvaged from fallen trees, turning it all into custom art. His bespoke portraits feature intricately cut pieces of wood that he personally mills! It makes for a great newlywed or housewarming gift—we love how the rustic charm will instantly warm up any space. From $495, texashoover.etsy.com


Source: realsimple.com

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MGIC Investment Corp., the largest provider of private mortgage insurance, said today it lost $273.3 million during the fourth quarter, compared to a quarterly loss of $1.47 billion a year earlier.

But though losses have decreased, the company doesn’t expect profitability during 2009, and worse, warned that it may need additional capital to continue writing new business.

Not that business is booming anyways.  New mortgage insurance written during the quarter totaled just $5.5 billion, down from $24 billion a year earlier.

For all of 2008, new insurance written totaled $48.2 billion, off from $76.8 billion last year.

Meanwhile, 12.37 percent of the company’s insured loans were delinquent, up from 7.45 percent last year and 6.13 percent at the end of 2006.

The Milwaukee-based insurer noted that the mortgage industry is experiencing material losses on 2006 and 2007 books, which could push MGIC’s risk-to-capital ratio beyond levels necessary to meet regulatory demands.

“Because we cannot predict future home prices or general economic conditions with confidence, we cannot predict with confidence what our ultimate losses will be on our 2006 and 2007 books,” the company said in its earnings release.

“Our current expectation, however, is that these books will continue to generate material incurred and paid losses for a number of years.”

“As a result, we are considering options to obtain capital to write new business, which could occur through the sale of equity or debt securities and/or reinsurance. We cannot predict whether we will be successful in obtaining capital from any source but any sale of additional securities could dilute substantially the interest of existing shareholders.”

The company made a series of underwriting changes over the last year and change to mitigate losses, but continues to experience painful losses on the high-risk loans it insured during the tail end of the housing boom.

Their outlook certainly doesn’t bode well for mortgage insurers, much less the industry as a whole.

Last June, mortgage insurer Triad Guaranty halted new business and cut jobs because of rising mortgage defaults and costly claims.

I wouldn’t be surprised to see a few more follow down that path this year.

(photo: przemkostachowski)

Source: thetruthaboutmortgage.com

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Airbnb is continuing to fight back against restrictions imposed on it, even as cities continue to crack down on its short-term rentals business model.

The company is partnering with the Paris-based arm of the renowned real estate firm Century 21 in order to try and get around regulations that prevent tenants from subletting their homes on Airbnb.

In the past, apartment landlords in numerous cities around the world have complained that Airbnb encourages their tenants to break their contracts by subletting their rented homes. They argue that this creates unsafe conditions for other tenants, though it’s likely that in many cases the real reason for the discontent is that landlords are missing out on a larger profit.

Landlords are so upset at Airbnb that a group of U.S. property owners earlier this year announced their intent to sue the company.

Airbnb has already been subject to numerous regulations in some cities, who’re worried about its effect on local housing markets.

So now, Airbnb says it’s teaming up with Century 21 in Paris in a deal that it hopes will appease landlords and keep its business alive.

Paris has some especially tough regulations against Airbnb, but the city is also a massively popular tourist destination and therefore a key market. Under the deal with Century 21, landlords can now agree to allow their tenants to sublet on the platform, provided they get a cut of any deal. The agreement stipulates that landlords receive a 23 percent cut, and Airbnb will get 7 percent, from each guest stay.

“The goal is to make it easier to sublet so hosts can welcome guests up to 120 days per year on Airbnb,” Airbnb officials told HousingWire. “A win-win deal as tenants, landlords and the agency all share the income when a booking is made on Airbnb.”

“With the Airbnb-friendly lease, subletting will be much better supervised,” the company continued. “Moreover, this deal does not dry up the supply of housing in tense areas but encourages subletting of occupied homes.”

Airbnb said if the partnership proves to be successful, it will expand the program to other major cities.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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Source: realtybiznews.com

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Let me be contrarian: Get ready, because mortgage rates are going to rise in 2021. Now before you respond, just read the rest as to why.

The Mortgage Bankers Association in its most recent forecast sees two things that stand out. First, 2020 will prove itself to be the second biggest mortgage year in history. Topping $3 trillion will put it only behind 2003 in single family mortgage production history.

Second, the MBA joined the GSEs and other economists who forecast a significant drop in mortgage production in 2021, with most estimating declines in the range of $700 – $800 billion year over year.

Some will try to argue, “but wait, Powell said the Federal Reserve would keep rates low for the foreseeable future! You must be wrong.” There is a difference here. Yes, the Fed will likely keep short rates low, but mortgage rates and some longer-term Treasuries likely won’t enjoy the same ride.

Here are the reasons why upward pressure on mortgage rates could stall the refinance wave and cut overall national originations volume in 2021:

1. The Fed: The Federal reserve is the single biggest buyer of agency mortgage backed securities (MBS) in the world. According to the Urban Institute, “In March the Fed bought $292.2 billion in agency MBS, and April clocked in at $295.1 billion, the largest two months of mortgage purchases ever; and well over 100 percent of gross issuance for each of those two months. After the market stabilized, the Fed slowed its purchases to around $100 billion per month in May, June and July. Fed purchases in July were $104.6 billion, 35 percent of monthly issuance, still sizable from a historical perspective.”

The question is what happens after a covid vaccine and a normalization of economic activity which is expected next year. The Fed is already being very careful not to commit to MBS purchases after the end of this year, a lack of commitment very different to their clear stance on fed funds. If the fed continues to slow or stop, something which is inevitable, the supply imbalance will force rates higher as MBS prices drop in search buyers to take up the excess.

Click image to expand

2. The Debt: The national debt is now at 100% of GDP, the highest level since WWII. Per

CBO’s September paper, “By the end of 2020, federal debt held by the public is projected to equal 98% of GDP. The projected budget deficits would boost federal debt to 104% of GDP in 2021, to 107% of GDP (the highest amount in the nation’s history) in 2023, and to 195% of GDP by 2050.”

The CBO’s projections for the U.S. deficits looking forward and the mounting debt load threaten the nation’s ability to do many things, as the majority of spending will be to mandatory expenditures that include interest on the growing debt load. Inflationary pressure will result from the need to finance these deficits through new issuance of treasuries, thus putting upward pressure across the stack of interest rates, a far different outcome than what the Fed may do to keep short rates low.

3. The GSE Capital Rule: The FHFA just closed off the comment window on the proposed capital rule for Fannie and Freddie. This rule is a critical component to FHFA’s plan to release the GSEs from conservatorship. The proposed rule is considered onerous by many with the consensus view stating in comment letters that rates would rise between 20-30 bps. Former Freddie Mac CEO Don Layton, former Arch MI CEO Andrew Reppert, and Fannie Mae each stated the same in their comment letters.

4. The Adverse Market Fee: This arbitrary add-on for most refinance mortgages from the GSEs of 50 bps equates to roughly an increase in rate of .125. This goes into effect on Dec. 1 of this year.

5. Release from Conservatorship: FHFA Director Calabria is working feverishly to release Fannie and Freddie from conservatorship and moving at a pace to lock in as much of this as possible quickly given the risk of an administration change. There have been outcries from MBS investors, including some of the largest buyers.

As reported, in a letter to Mark Calabria, director of the Federal Housing Finance Agency, PIMCO said freeing the companies by executive fiat would be interpreted by investors as an end to the government’s guarantee of the MBS. “That would boost mortgage rates and force some investors to sell the bonds,” the PIMCO executives said. Investors would demand a higher return for the increased risk. “Mortgage rates will increase, homeownership will likely suffer and the national mortgage rate will no longer exist,” the executives wrote.

For those in the mortgage industry, it doesn’t take all of these things to result in the forecasted 700-800 billion drop next year. Frankly just the slowing of MBS purchases and the implementation of the capital rule alone would do it. In fact, MBA’s forecast of the volume decline assumes only the slightest increase in mortgage rates, remaining in the low 3% range next year. In my conversations with economists, the view is that we will end the year with a good first quarter in 2021 simply based on year end overflow.

The second quarter may start off well, but the general sense is that by the third and fourth quarters the market will reflect the impact of coupon burn out and any of these events above beginning to take shape. One thing for certain is that the Fed does not like being in this deep, we saw that following QE activities during the Great Recession.

As MBA’s Fratantoni states in his recent Housing Wire article, “2020 has been a banner year for mortgage originators and the millions of households who have benefitted from record-low rates through refinancing. The industry will enjoy this boom for a while longer, but our expectation is that the refi wave is cresting.”

“Make hay while the sun shines” is an old expression. The sun is clearly shining on our industry this year. But it’s important for mortgage banking executives to not misread the statements of Chairman Powell as a commitment to anything more than short rates. The rally you are experiencing this year is due to interventions in the market due to a pandemic recession. Normalization will take out buyers, eliminate the supply “short,” and inflation will ultimately do its thing on rates just enough to cut the market by 25%-30% in 2021 and a bit more in 2022.

Planning ahead for that environment is critically important as market contractions will reduce spreads as well as volume. Thinking about the appropriate right sizing and forward-looking market strategies now will separate the winners from the rest.

Source: housingwire.com

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A handful of closely followed mortgage rates grew over the last seven days. The average 15-year fixed and 30-year fixed mortgage rates both increased. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also increased.

As inflation surged in 2022, so too did mortgage rates. To rein in price growth, the Federal Reserve began bumping up its federal funds rate — a short term interest rate that determines what banks charge each other to borrow money. By making it more expensive to borrow, the central bank’s goal is to reduce prices by curtailing consumer spending.

During its July 26 meeting, the Fed initiated a 25-basis point (or 0.25%) hike to its federal funds rate, marking its 11th increase in the current rate hiking cycle. The most recent increase could have an impact on mortgage rates, but experts say the markets may have already factored it into rates.

Current mortgage rates for August 2023

The Federal Reserve just increased interest rates. That might cause a change in mortgage rates. Shop around and find a rate you can afford now. By entering your information below, you can get a custom quote from one of CNET’S partner lenders. 

About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.

The Fed doesn’t set mortgage rates directly, but it does play an influential role. Mortgage rates move around on a daily basis in response to a range of economic factors, including inflation, employment and the broader outlook for the economy. A lower inflation rate is good news for mortgage rates, but the potential for additional hikes from the central bank this year will keep upward pressure on already high rates.

Rather than worrying about mortgage rates, though, homebuyers should focus on what they can control: getting the best rate they can for their financial situation.

30-year fixed-rate mortgages

For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 7.39%, which is a growth of 5 basis points from one week ago. (A basis point is equivalent to 0.01%.) The most frequently used loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will often have a higher interest rate than a 15-year fixed rate mortgage — but also a lower monthly payment. You won’t be able to pay off your house as quickly and you’ll pay more interest over time, but a 30-year fixed mortgage is a good option if you’re looking to minimize your monthly payment.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 6.65%, which is an increase of 6 basis points from the same time last week. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a larger monthly payment. But a 15-year loan will usually be the better deal, if you can afford the monthly payments. These include usually being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.

“Mortgage rates have hovered in the 6% to 7% range for the past 10 months. Though home prices have softened slightly nationally, the still-high cost of borrowing means hopeful home buyers have felt little relief,” said Hannah Jones, economic research analyst at Realtor.com.

Apache is functioning normally

I mentioned yesterday that the National Association of Home Builders was in Washington looking for their own bailout, and now we have some more details, startling ones at that.

The NAHB wants mortgage rates reduced (subsidized) to as low as 2.99 percent on 30-year fixed-rate conventional mortgages purchased between January 1 and June 30 of this year, followed by rates of 3.99 percent for the latter half of the year.

Additionally, they want the current $7,500 home buyer tax credit bumped up to 10 percent of the home’s purchase price, capped at 3.5 percent of local FHA loan limits.

That would result in a range between $10,000 and $22,000, available to all purchasers, and would come with the elimination of the recapture provision.

The whole plan is being coined as “Fix Housing First,” with the hope it becomes the main focus of the pending stimulus plan bouncing around Washington.

And now for the shocking part:  “The excess housing inventory in today’s market is the result of unprecedented foreclosures, not overbuilding. That’s why we support Sheila Bair’s foreclosure relief plan and any common-sense proposal to alleviate the foreclosure problem,” NAHB chief Jerry Howard said in a statement.

So the excess supply of housing inventory is not the result of overbuilding?  Hmm…

If I recall, the foreclosures came after years of overbuilding that eventually led to an oversupply and subsequent price depreciation.

Face it; you can’t take a drive for more than 20 minutes in a metropolitan area without coming across a new, sprawling development full of vacant cookie-cutter homes.

And it’s near impossible not to pass a corner where a young sign-spinner is urging you to check out the latest, new development full of “luxury” condos and single-family homes.

So what’s the big plan for the homebuilders?  Lower rates to fill up all their vacant, new properties with more families so they can cut their losses and run?  How long before that backfires and we’re in an even bigger mess?

Home prices must fall.

Source: thetruthaboutmortgage.com

Apache is functioning normally

The Pilgrims landing at Plymouth Rock. The infamous Salem witch trials. The Boston Tea Party. New England fall foliage. Clam chowder. Harvard University. What do all these iconic places, things and events have in common? Massachusetts.

Living in this popular New England state, you’re living surrounded by the early history of the United States, from the first public library and the first Thanksgiving. You have access to world-class higher education at Massachusett’s many esteemed universities and colleges.

From fall foliage to breezy beaches, its landscapes capture that perfect mental picture of New England’s nature. It’s the home of Boston, one of the most popular cities on the East Coast. Also, you can’t beat the clam chowder and seafood.

Massachusetts also boasts a high median household income of $84,385. But, as one of the most desirable states to live in New England, the cost of living in Massachusetts often exceeds the national average. Boston, in particular, is very expensive. But other cities around the state are cheaper. Just because the cost of living is particularly high in one area doesn’t mean the entire state is unaffordable. The right place to live in Massachusetts depends on your budget and lifestyle. Here’s what you can expect in terms of the cost of living expenses around Massachusetts in 2022.

Massachusetts housing prices

Housing costs in Massachusetts are higher than the national average. This is true even of small cities located far from major metro areas. The average cost for an apartment or rental in small towns and cities around the state is higher than in other similarly-sized towns elsewhere. Rates are generally still manageable, though. Especially if you’re living in a small- or mid-sized college town, you won’t lack roommate options. But, in some cities, the cost of living in Montana for housing is scarily high.

This is what you can expect to pay for housing in two different Massachusetts cities. One is at the extreme western edge of the state, with a population of around 42,500. The closest big cities are Springfield and Albany, both roughly an hour away. The other city is at the complete opposite end of the state. It’s the most populous city in the state and a major, influential East Coast urban center.

Boston

You must really like baked beans and the Red Socks to put up with the cost of housing in Boston, which is 120.9 percent higher than the national average. This puts it up there among the most expensive places to live in the United States.

You can expect to pay around $3,887 for a one-bedroom apartment in the city. A two-bedroom apartment kicks things up significantly to $4,982. These prices are up 9 and 10 percent, respectively, from the previous year.

Home prices here exceed the statewide median sales price. Buying a home in Boston has a median sale price of $780,000, which is 3.6 percent higher than last year.

Pittsfield

Housing costs in the charming, peaceful city of Pittsfield in western Massachusetts are 12.5 percent higher than the national average. Prices are also on the rise. The average rent for a one-bedroom apartment is $1,250 per month, which is up 14 percent from last year. The cost for a two-bedroom has climbed even more. Jumping 57 percent from last year, the average two-bedroom apartment around town will set you back $1,450.

The cost of buying a home here is also rising. Up 37.2 percent from last year, the median sales price for a house around Pittsfield is $269,500. However, since the median home sale price around the state is $560,000, Pittsfield prices are a steal.

Food prices

People in Massachusetts love food. It’s no surprise why. Boston is a bonafide foodie destination thanks to its namesake baked beans and cream. The lengthy Massachusetts coastline serves up all kinds of fresh and delicious seafood like clams and lobsters.

Massachusetts is among the top five states for most expensive average grocery costs. Massachusetts residents shell out between $3,601 to $4,000 a year per person for food. So, consequently, the cost of living in Montana for food is higher than the national average.

Boston comes in first place for the highest food costs in the state. Pittsfield ranks a more reasonable amount above the national average:

  • Boston is 16 percent above the national average
  • Pittsfield is 7.3 percent above the national average

Doing a line-by-line comparison of food costs in the two cities reveals that most staple food items have fairly similar costs. Picking up a half-gallon of milk in Boston costs $2.76. Pittsfield is slightly cheaper at $2.52. A dozen eggs cost almost exactly the same at $2.22 in Boston and $2.23 in Pittsfield. Steak lovers will prefer Pittsfield over Boston when it comes to steak prices. You’ll be paying $17.92 for steak in the City on a Hill, but a more affordable $11.68 on Pittsfield.

Since Boston is such a big food town, expect to pay more for dining out, as well. Going out to a three-course meal at a nice restaurant for date night costs $82.50 compared to $69.50 in Pittsfield. You’ll pay the same for a casual meal out in both cities at $20.

Utility prices

Electricity, internet and water are the biggest slices of the utility pie. Massachusetts gets its energy and electricity from a mix of renewable and non-renewable energy sources. These include hydropower, coal and nuclear. Natural gas is the biggest supplier.

Utilities are the one area where Pittsfield or Boston dip below the national average for cost of living:

  • Pittsfield is 5.1 percent below the national average
  • Boston is 23.5 percent above the national average

Similar to its other cost of living categories, Boston residents pay more for utilities. Total energy costs for the month total around $250.47. But in Pittsfield, you’ll be paying around $161.38. But, in a twist, the internet is more expensive in Pittsfield than in Boston. Paying for 60 megabits per second in Pittsfield costs $104.33. But, in Boston, you’ll only pay around $62.40. That’s a difference of 67 percent.

Transportation prices

From buses to subway to ferry routes, there are tons of different ways to get around Massachusetts’ cities and towns. Not only does it save on gas, parking and other car-related expenses, but you can watch charming college towns or scenic bays glide by. Big cities like Boston have huge transit providers, and Massachusetts also has a robust regional transit system. Fifteen different agencies provide regional public transportation in smaller cities and towns around the state.

However, the cost of living in Massachusetts for transportation in all these cities is higher than the national average. So, while you save money on your car, you’ll be pay more for transportation than the average American:

  • Boston is 21.1 percent above the national average
  • Pittsfield is 23.2 percent above the national average

The cost of transportation in Pittsfield and Boston is pretty close. But Pittsfield beats Boston slightly for transportation prices. Here’s what you can expect to pay to ride local transit in these two cities.

Berkshire Regional Transit Authority in Pittsfield

This bus-only agency provides public transportation to the residents of Pittsfield and surrounding Greater Berkshire County. It operates 14 fixed bus routes, as well as paratransit services.

A single ride within the local network costs $1.75 if you pay in cash. Paying with a Charlie Card knocks off 20 cents, bringing it down to $1.55. A 30-day pass costs $52. For systemwide access, fares start at $4 with the Charlie Card and a 30-day pass is $140.

Public transportation around Pittsfield has a low transit score of 30. If you don’t want to take the bus or your car, there are other ways to get around town. As a safe, close-knit community, it’s easy to navigate town on foot. This is especially true of the downtown area and family-friendly neighborhoods. Pittsfield scores a high 70 for walking. But, it’s not so bike-friendly, ranking only 48 on the bike score.

Massachusetts Bay Transportation Authority in Boston

Boston gets its public transportation from the MBTA. Locals call it the “T”. Their fleet and services consist of bus routes, subway, rail and water ferry routes. Their service extends beyond the city of Boston to the Greater Boston metro area. It has 177 bus lines, three ferry routes and four subway lines accessing 128 stops.

MBTA fares vary depending on what type of service you’re using. A one-way adult ticket on the subway costs $2.40 with cash or Charlie Card. A single bus fare is $1.70. For the commuter rail and ferry, fares encompass a range based on the route or distance traveled. A one-way ferry ride costs between $3.70 and $9.75. On the commuter rail, you pay between $2.40 and $13.25 depending on how far you travel.

Passes similarly vary. A subway and bus day pass is $12.75. A monthly LinkPass for the two costs $90 with unlimited travel. Commuter rail monthly passes are as low as $90 and as high as $426. You’ll pay between $90 and $329 for a monthly ferry pass. Since monthly parking passes around Boston average $300, you need to decide for yourself if using public transit offers enough savings or convenience. If you choose to drive, you’ll have to pay tolls on the Massachusetts Turnpike. Toll rates depend on the length of time you’re using the toll road to use one of the harbor tunnels or go out to Logan Airport. Rates start at around $1.75 for two-axle vehicles.

With such diverse public transportation options, it’s no surprise Boston has a high transit score of 80. Its dense urban center and vibrant neighborhoods are why Boston also has very high walk and bike scores. This ultra-pedestrian-friendly city boasts a stellar 89 walk score and 77 bike score.

Healthcare prices

Similar to many other costs of living categories, the cost of living for healthcare around Massachusetts is higher than the national average. But that number is extremely subjective. Health, and therefore, healthcare costs can vary widely by person, even within the same city. Some people have to pay more for prescriptions, higher insurance premiums, out-of-pocket costs for check-ups and more. This is why it’s so difficult to find the average healthcare cost of an area and you should take any statistics or figures with a grain of salt. Here’s how these two Massachusetts cities stack up to the national average:

  • Pittsfield is 15.1 percent above the national average
  • Boston is 17 percent above the national average

That being said, Massachusetts has it pretty good healthcare-wise. The state is consistently ranked as being one of the healthiest nationwide, as well as having the best healthcare. It’s home to renowned hospitals like the Boston Children’s Hospital and Massachusetts General Hospital. Since Massachusetts is famous for its top universities, it also has many top-tier medical schools and leading research facilities. With universities around the state producing world-class doctors, nurses and healthcare professionals, naturally state hospitals staff the best.

Even for such a healthy state, it’s important to still go to see your doctors at least once a year. Out-of-pocket costs for a doctor visit cost roughly the same in both cities at $182.50 in Boston and $185 in Pittsfield. Going to the dentist in Boston is slightly pricier at $131.50 compared to Pittsfield’s $117. Even with higher costs above the national average, you’re still paying for the best in healthcare.

Goods and services prices

Spilled some baked beans on your shirt and need to take it to the dry cleaners? Going to get your hair cut before a sunny afternoon out in Pittsfield? These various services and items fall under the category of miscellaneous goods and services. While these may seem like small expenditures, they can add up fast. This is especially true in big cities like Boston. That’s why you need to consider how expensive these items and services are in a particular state. The average cost of living for goods and services in Massachusetts cities is above the national average:

  • Pittsfield is 8.2 percent above the national average
  • Boston is 19.9 percent above the national average

Just because one city has the highest overall rates doesn’t mean all services are more expensive. For that dry-cleaning run, you’ll actually be paying more in Pittsfield. It costs $23 to go to the dry cleaners there, but $16 in Boston. In Boston, it’s better to let your hair grow longer than pay $43.33 for a cut. Or, drive over to Pittsfield and get it done for half at $23.

Taxes in Massachusetts

Since you’ll also be paying taxes on those goods, services, food and other essentials, it’s important to know how much is going to tax. Massachusetts has a statewide sales tax rate of 6.25 percent. To put that into perspective, when you spend $1,000 on Red Sox tickets, you’ll pay an extra $62.50 for taxes.

But that’s all you’ll be paying in tax. Massachusetts doesn’t have any city or county sales taxes to add to the statewide rate. That means that:

  • Pittsfield has a combined tax rate of 6.25 percent
  • Boston has a combined tax rate of 6.25 percent

The other tax you need to consider is the income tax. A certain amount will come out of each paycheck, which impacts your monthly budget. In Massachusetts, income tax is a flat 5 percent. Massachusetts used to have high enough taxes that it earned the nickname Taxachusetts. But, they’ve cut taxes significantly to bring the rate down.

How much do I need to earn to live in Massachusetts?

Now the crucial question: Is life in Massachusetts within your means? Experts recommend not spending more than 30 percent of your gross monthly income on rent. The cost of living for housing in Massachusetts is generally the biggest slice of the monthly budget pie. You need enough left over for groceries, savings and other essentials and incidentals.

Considering the 30 percent rule, you’d need to make around $104,592 a year to afford Massachusetts’ average rental rate of $2,615 for a one-bedroom apartment. That comes out to roughly $8,719 per month in income. Since the median household income in the state is $84,385, showing that housing is priced out of the average person’s reach.

Cities like Boston are already getting prohibitively expensive. But, you may have more luck in smaller cities and towns.

Use our rent calculator to see if you can live comfortably in Massachusetts based on factors like monthly pre-tax income and expenses.

Living in Massachusetts

Massachusetts is not the cheapest state, and the cost of living is going up in many areas. Housing, in particular, is being hit hard. But living here has plenty of other benefits like fun cities, great access to the outdoors and all those great Boston foods. If you can comfortably afford the rising cost of living in Massachusetts, you, too can spend summers out on Cape Cod and study at world-class universities.

The Cost of Living Index comes from coli.org.
The rent information included in this summary is based on a calculation of multifamily rental property inventory on Rent. as of July 2022.
Rent prices are for illustrative purposes only. This information does not constitute a pricing guarantee or financial advice related to the rental market.

Source: rent.com