decades

Apache is functioning normally

With the July 4th weekend nearly upon us, it’s time to reflect on all that we have been through in the past year and how, as a country, we have overcome so many daunting obstacles, including what we have been through in the housing market.

The first thing that pops into my shriveled brain is how the housing market looked in February of 2020. Data from that month showed that housing was breaking out — but because we received this data in March of 2020, we were all too busy trying to survive to take notice.

Once the fear of the virus calmed down, we began a truly remarkable economic comeback, perhaps the fastest economic comeback from a significant economic downturn in the history of the U.S., with the housing market leading the way. 

But for every silver lining there is a cloud.

The solid demographics for home purchasing and historically low mortgage rates — which have been in a downtrend for four decades — have created a housing market where prices are rising too fast. Even though we have good demographics for housing, we are not seeing a growth in sales that would account for the rate of growth in prices.

Before COVID-19 was even a whisper in our minds, I thought that in the years 2022 and 2023, price pressures for housing could be the big story. But I expected that higher mortgage rates of over 4% would keep prices from escalating out of control.

Instead, demand picked up early and because of the effects of COVID-19 on the world economies, mortgage rates are down to all-time lows. Rates haven’t even gotten to 3.5% recently — forget getting above 4%. These low mortgage rates are being sustained in a climate of some of the best economic growth in the 21st century and hotter-than-normal inflation data.

In this first year of economic expansion, we continue to have a good savings rate and healthy household formation demographics.

I anticipate that by September 2022, we will have all the jobs back that were lost due to COVID-19. When one considers that we currently have the most job openings ever recorded in U.S. history, (9.3 million) this date does not seem to be a stretch. Note, too, that all this good economic mojo is going on before we have even started fiscal spending on infrastructure.

With this recipe of excellent national economics, good demographics for housing, an improving employment picture and low mortgage rates, it makes sense that home prices would be hotter than normal. But as I have said before, the high rates of growth in home prices have been more a function of low housing inventory than extreme credit growth in demand. 

But all is not hopeless: There are several reasons why housing inventory should pick up in the next several months and going into 2022.

First, the higher prices we are seeing in the current market are making it difficult for some buyers to compete. Clearly not all buyers, but enough to keep the extreme low housing inventory levels hard to maintain. This is a key point, but because we got to all-time lows in housing inventory, a move higher from these extreme low levels isn’t saying too much.

From the NAR:

Second, forbearance programs and the eviction moratorium will be ending soon. Because loan holders started their forbearance programs at different times they will exit the programs at different times, too, so don’t expect a flood of housing inventory to appear at once. Forbearance programs have gone from near 5 million loans to a tad over 2 million. A lot of primary-residence households on forbearance programs have already exited the program and housing inventory remains chronically low.

Nevertheless we can expect some of these homes to come on to the market. These homes might be mom and pop landlords who were unable to collect rent during COVID-19 and want out of the rental game or some investors looking to cash in on high home prices. In any case, to think that we would have zero housing inventory created from this crisis is highly unlikely. 

Third, while demand is solid in 2021, and we should have slightly more total home sales than we had in 2020, we are not seeing growth in credit (number of mortgages taken out). To think that we would have double-digit price growth with essentially slight home sales growth is the essence of bad inflation. As you can see below, what we experienced from 2018 to 2021 looks nothing like the credit growth we saw from 2002-2005.

We got to all-time lows in housing inventory recently so any increase is going to be a high percentage increase and that is going to fool some folks that the housing inventory picture has changed dramatically. The actual number of homes making up that increase is not going to be much, however, so don’t look at it like that. Instead look to see if total housing inventory gets back to the levels we saw in early 2020.

Getting back to 2020 levels with days on market going past the teens is the No. 1 priority for the housing market. We need more than the typical rise due to seasonality that happens every spring. We want total inventory levels to go above 1,520,000 at minimum.

In 2018-2019, total housing inventory was in the range between 1,520,000 – 1,920,000 and that level of inventory helped to drive real home-price growth in 2019 into negative territory briefly. Existing home sales during those years stayed in the monthly sale range of 4,980,000 to 5,610,000 homes. More importantly, the days on market were higher than what we see today — and as such we had fewer bidding wars and less price growth.

The effect of higher mortgage rates, which in late 2018 got to 5%, also contributed to more stability in housing prices. 2018 and 2019 were more balanced markets, so in my view it was a healthier housing market compared to what we have today. 

Once the 10-year yield gets above 1.94%, which should bring mortgage rates above 3.75%, then things should cool down enough to stabilize the unhealthy price gains we are currently experiencing. The 10-year at 1.94% is not a very high bar, but even so, that is higher than what I have forecasted for 2021. 

If housing demand is better than I thought going into the demographic sweet spot years of 2022 and 2023, then housing inventory may not improve much. I still believe in my replacement buyer premise rather than a credit boom housing market. However, if I am wrong, then we will see it for sure in years 2022 and 2023. The price gains in 2020 and 2021 have already met the target that I anticipated to be cumulative for the five-year period of 2020 to 2024. This pathway explains my concern over what has happened recently.

During the years 2020 to 2024, I anticipated total sales (new and existing homes combined) to stay at 6.2 million or higher. The only way I saw this not happening was if home prices got out of hand early on, and guess what, that has happened. While we won’t break lower than 6.2 million in 2021, I am mindful of these recent price gains in both exiting and the new home sales market. Demand for existing homes will come from first-time homebuyers, cash buyers, investors, move-up and move-down buyers. The bump in demographics in the years 2020-2024 has already showed itself to be a powerful economic force for the United States of America.

All these buyer types will create steady replacement demand for the existing home market. The new home sales market, on the other hand, is driven by wealthier older buyers with mortgages. For this reason, new home sales are more dependent on mortgage rates. I recently expressed some concern in this market here.

More than anything, I am hoping that what happened in 2013-2014 and 2018-2019 happens again.  During those periods, interest rates went up, which increased housing inventory and days on the market. The additional supply cooled the rate of growth of home prices and stopped the bidding wars. Unless we get an increase in housing inventory from softening demand or end-of-forbearance selling, only an interest rate increase will get us above 1,520,000 total housing inventory and out of the low housing inventory/high price quagmire we have been in since the summer of 2020, which has been most unhealthy housing market post-2008. Still, these are first world problems. I mean, come on, it’s not like we are having a bubble crash like some bros wanted to see.

Source: housingwire.com

Apache is functioning normally

Efficiency, Fulfillment, Correspondent Products; Offices Into Housing; Capital Markets

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Efficiency, Fulfillment, Correspondent Products; Offices Into Housing; Capital Markets

By:
Rob Chrisman

Mon, Jul 17 2023, 10:25 AM

I am often asked about the jumbo segment of our business. Frankly, aside from the coasts and a couple cities in-between, much of the nation is not overly concerned with it. Paying $1 million or more for a house may seem excessive to most Americans, although that doesn’t mean million-dollar homes aren’t prevalent in some parts of the U.S. Per LendingTree, only an average of 6.68 percent of owner-occupied homes in the nation’s 50 largest metros in 2021 were valued at $1 million or more. The share of million-dollar homes has grown: That’s up from an average of just 4.71 percent of owner-occupied homes in the nation’s 50 largest metros in 2020. San Jose (66.3 percent) and San Francisco, CA (52.9 percent) have the largest share of million-dollar homes, the only two cities where most homes are worth at least $1 million. Including San Jose and San Francisco, the four metros with the highest percentage of million-dollar homes are in California. Only four metros (Buffalo, NY, Cleveland, Pittsburgh and Louisville, KY) have fewer than 1.00 percent of owner-occupied homes valued at $1 million or more. (Today’s podcast can be found here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades. To experience how Richey May can help you transform your mortgage business, visit richeymay.com. Hear an interview with Richey May’s Nathan Lee on outsourcing considerations and changing fixed costs into variable costs.)

Lender and Broker Software, Services, and Products

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If you’re looking for ways to squeeze every dollar out of each loan transaction, check out Computershare Loan Services (CLS). You can turn your fixed costs into variable expenses by outsourcing your processing, underwriting, and closing to CLS’ originations fulfillment team. They maintain top-tier POS, LOS technology, and a robust compliance program that keep you one step ahead. CLS’ money-saving solutions continue! Membership in their mortgage cooperative gives you exclusive access to negotiated pricing on commonly used mortgage services like VOI, flood determination, and trailing doc solutions. They do the hard work, uncovering best-in-class services that positively impact lenders. You’re one call away from savings that could dramatically improve your bottom line. Contact Computershare Loan Services today.

Blend has always put borrowers at the forefront of their mortgage products. KeyBank, a regional bank that’s been around for nearly 200 years, knows that customers are the backbone of their business too. And with modern mortgage expectations, they needed a modern mortgage solution. Learn how KeyBank’s partnership with Blend improved their NPS scores, operational efficiency, and LO adoption in this case study.

Sleep in Your Office? What About the Vacant Homes Conspiracy?

Before “van life” people would occasionally sleep in their offices. But what about making the office into a place to sleep?

There’s an anomaly facing major cities in the U.S.: many office buildings are empty while housing is in short supply. There has been a lot of talk of simply converting large offices into more apartments, but it’s much more difficult than it seems. Conversions are possible, but real estate developers face a variety of physical, regulatory, and financial constraints. Zoning restrictions and regulations restrict alterations and limit the scope for office-to-residential conversions. Structural complexity and code requirements mean that not all buildings are conducive for repurposing (e.g., ceiling height, access to lighting, plumbing considerations, etc.), and many structures have to be reinforced with more steel. Repurposing is often an expensive process that comes on top of initial acquisition costs, and ultimately will not save or make any money.

High costs require high rents to offset, meaning that most office conversions tend to cater to the luxury segment of the market and won’t help to alleviate a shortage of affordable housing in the city. Finally, as the status of remote work remains in flux, there’s a big question mark over the desirability of these conversion projects in the first place.

While we’re talking about inventory solutions, Chris Maloney with BOKF had some recent thoughts on people who look at the level of vacant single-family homes “that are, to them, evidence of a nefarious plot by speculators to hold supply off the market, drive prices higher and then sell at an even greater profit.” “There are a number of problems with this viewpoint, the most evident being that the total of vacant houses in these United States is currently far below its historic average.

“Except that of the 145 million or so housing units in the country, only about 15.1 million (or 10.4 percent of total housing stock) are vacant, which if it were proportionate to what the average has been this millennium (12.7 percent of total housing stock) would mean we’d have about 3.3 million more vacant homes than we currently see. The supply of vacant homes, like everything else in the housing market, is scarce. And of the 15 million housing units that are vacant, the Census Bureau number crunchers estimate only about 3.6 million fall into the ‘other’ category where speculators reside, and of that 3.6 million only about 227,000 fall into a sub-category (such as “preparing to rent/sell”) which points to the unit being readied for a near-term sale.

“Bottom line, it does not appear (at the national level) that speculators holding homes off the market, waiting for a better selling point, are the cause of the housing crisis. Of course, an institutional investor can concentrate its fiscal firepower onto specific areas, but even if they do the question here comes down to private property. If someone buys a home and wishes to take the risk of holding it off the market until they decide it’s the right time to sell, that is their right as it is their house, not society’s.” Thank you, Chris.

Capital Markets

Where to start with last week? Upbeat quarterly earnings reports on Friday from three of the largest U.S. banks capped a week in which almost everything rallied in markets. JPMorgan Chase, Citigroup, and Wells Fargo all reported above-consensus results to kick off the Q2 earnings season. However, the main economic headline over the last week was the continued deceleration in inflation, as core CPI was below 5 percent for the first time since November 2021. Consumer prices rose 0.2 percent in June and core CPI increased 4.8 percent from one year ago as durable and nondurable goods saw price declines. U.S. inflation is down from its peak of 8.9 percent, and suddenly “disinflation” is the buzzword on trading desks.

While the lower inflation numbers were welcomed by the markets, the Fed is still expected to increase the federal funds target following its next meeting on July 26. The committee is likely to feel validated that tighter monetary policy is slowing inflation while economic growth has not turned negative. Housing costs may continue to be a headwind in the Fed’s fight to get back to 2 percent inflation as higher interest rates not only reduced demand as intended but have also severely limited supply which has buoyed home prices. For those thinking that the Fed is done hiking rates, Fed Governor Waller said on Friday that he expects two more rate hikes this year.

This week kicks off with a limited calendar that consists of just NY Fed manufacturing for July. Data and supply pick up over the remainder of the week and include June retail sales, June industrial production/capacity utilization, May business inventories, and July homebuilder sentiment tomorrow, June housing starts and permits on Wednesday, and July Philly Fed manufacturing, June existing home sales, June leading indicators, and $17 billion in new 10-year TIPS on Thursday. After the 10-year U.S. Treasury yield dropped 23 basis points over the course of last week to 3.82 percent, in the early going to start the week, Agency MBS prices are better about .125 versus Friday, the 10-year is yielding 3.78,
and the 2-year is 4.72.

Employment

Black Knight is hiring an MSR Account Manager in its Optimal Blue division. This person will be responsible for helping clients with strategies related to mortgage servicing rights valuation and hedging, whole loan valuations, and more through the employment of industry-leading, proprietary analytics. This position is available in Chevy Chase, Md., Denver, Colo., and San Francisco, Calif. For more details on this role, contact Betsy Meek. In addition, Black Knight is always looking for talent across many roles. Visit BlackKnightInc.com/Careers for a full listing of all open positions.

Recently named by Euromoney.com as the Best U.S. Super Regional Bank in 2023, Citizens is garnering attention for its clear vision, strong leadership and disciplined execution. With the recent strategic acquisitions of HSBC branches and Investors Bancorp., making it geographically complete, Citizens is looking for talented salespeople (managers, loan officers, account representatives) in all three mortgage lines of business – Retail, Wholesale and Correspondent businesses throughout the Northeast, MidAtlantic, Midwest and Florida. Our deep product mix allows us to help many different loan needs, from affordable loan programs such as HomeReady to a best-in-class one-time close construction to permanent product, Citizens has what you need to succeed. Our specialty loan programs such as condo/co-op financing, rate protection programs with extended rate locks, along with an amazing Private Wealth discount value proposition for high net worth banking clients, ensures you have all the tools to win in this challenging market. To learn more, contact Sean Reilly or visit here.

Nations Lending continues growth, expanded opportunities for producers! Nations Lending is continuing its growth with multiple in-house product offerings, creating a world of opportunities for its origination team nationwide. The company’s dedication to servicing almost all its agency business and its licensure in all 50 states highlights its commitment to building the businesses of its loan officers. This proves true with the expansion of its recent product offerings: RIO and ACE. RIO is the company’s DSCR product (underwritten in-house), which eliminates proof of employment or income verification, services LLCs, and caters to short-term rentals. With ACE, borrowers complete their loan application and receive financing approval before initiating the homebuying process, varying largely from traditional pre-approval methods. Corey Caster, EVP of National Production says, “We know the headwinds originators are faced with today and our goal is to give them as much ammunition as possible. Every day our Leadership Team is focused on how we can improve our platform.”

“At Guaranteed Rate Affinity we believe our loan officers need the perfect combination of technology and human touch to succeed in this market. Not only are we a fintech organization but we focus on memorable experiences to drive loan officers’ personal branding. We have a dedicated events team to support our loan officers in the creation of these experiences that will leave a lasting impact. Build your business by leveraging the power of events to make connections and partnerships organically and stay top of mind in your community. Your Events Coordinator will take care of everything from start to finish, all you have to do is host your referral partners and clients. Learn more about what sets us apart. Contact Tim McGraw to get started.”

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Source: mortgagenewsdaily.com

Apache is functioning normally

There’s no avoiding it, the colour pink has taken a life of its own over the past few months, and that is courtesy of the firepower from the Barbie movie’s multi-million dollar marketing machine. While the tenants of the Barbiecore aesthetic may appear to be fairly fresh and new, influencing everything from fashion to entertainment and of course room decor, the fact stands that true devotees of the movement have known about its infectious effervescence for decades now.

Image credit: AirBnB

Naturally, the look lends itself perfectly to a life of celebrity with its vibrance and glamour, with notable names such as Angelyne and of course, Paris Hilton, counting themselves as proponents across generational gaps worth of lavish pink opulence. But if you’re new to the Barbiecore movement, let’s break it down into simple terms: taking its name after Mattel’s famed doll and her life in pink plastic, the idea is to unapologetically layer pink on pink, with touches of dollhouse whimsy thrown in for good measure.

Image credit: RF._.studio via Pexels

As all movements do, this one has also seen its fair share of rises and dips, where public opinion towards it oscillated between a curious novelty to a reviled symbol of bimbofication. In the case of modern-day convention, the Barbiecore aesthetic has come to represent a much-needed breath of fresh, strawberry-tinged air that heralds optismism and confidence into a post-pandemic world.

So if you’re looking to bring a little of that infectious joy into your own space and transform it into a Barbie Dream House of your own making, here are some great room decor tips you may want to consider!

1. Nailing the right shade of Barbiecore pink

The most obvious way to jump on board the Barbiecore room decor bandwagon is unsurprisingly, by painting your walls in the appropriate hue of pink. But selecting a pink that works best with your space is crucial, as different hues and shades can alter the visual proportions of a room, making it look either smaller or larger than it actually is. So pick wisely!

Shop our picks here!

In the case of Barbie’s exact shade of pink, it tends to lean heavily into an almost lurid tone of magenta. The closest possible paint swatch that matches this pink from Pantone™ is the PMS Rhodamine Red U.

If painting your room pink is too big of a commitment (understandably so), you can always pick to add pink accents such as cushions, lamps, or a mirror, into your space instead.

2. Consider adding a piece of mid-century modern furniture 

Introduced in 1959, Barbie and her accompanying dollhouses are inspired by the mid-century modernist trend that had taken architecture and interior design by storm at the time. Mid-century modern design, most commonly abbreviated into ‘MCM’, refers to an aesthetic that typically features clean, geometric lines accented by splashes of colour and an interplay of materials such as wood, glass, and metalware.

Shop our picks here!

This design motif is most famously featured in the first-ever Barbie Dream House set, which was introduced as a two-storey loft chock full of wood facade appointed MCM furnishings and pinks, yellows, and blues, representing the pinnacle of luxury living for the Mod era.

Naturally, you can score some extra Barbiecore points by adding mid-century modern furniture to your room or home, such as a sofa. Fortunately, furniture pieces after MCM can still be commonly found in most stores. Bonus points if it’s pink, for maximum Barbiecore room decor vibes.

3. Camp it up 

Another obvious design motif that is common to the Barbiecore aesthetic is naturally, camp. If you missed out on the show notes from 2019’s MET Gala theme, camp simply refers to the ‘love of artifice and exaggeration’, as American writer Susan Sontag describes.

Of course, given how children are the intended target demographic for the Barbie franchise, the notion of camp has always been inherently woven into the fabric of the brand and its visuals with its playful, larger-than-life interpretation of reality.

Shop our picks here!

You can imbue your living space with just a little touch of camp too by incorporating decorative accents such as pillows in the shape of a pair of lips, an oversized high-heel that also doubles as a recliner, or even light fixtures in the form of clouds.

4. More is more

In the Barbie universe, maximalism is king. This is to say that when your life is plastic and fantastic, you wouldn’t have to worry about downsizing or paring things down, whether it be in terms of your wardrobe or your home. Where the latter is concerned, forget about taking pages from Kon-Mari minimalism and find joy instead by filling your happy space with happy things.

Shop our picks here!

Think overhead LED strip lights or fairy lights for ambiance, or plants in fuscia pots to bring nature into your Dream House. There is truly no bric-a-brac too big, or too small, in this Barbiecore fantasy.

5. Don’t forget scents! 

Naturally, a big part of cementing the ambiance of your Barbiecore space beyond furniture and decor is by scenting it accordingly. With an entire market dedicated to room scents varying from stone diffusers to candles and even atomisers, the options are truly endless here.

Shop our picks here!

For the purposes of staying on-brand, floral-based scents are your best bet. Some great options include Jo Malone’s Peony and Blush Suede Home Candle, or the Red Roses Home Candle. For a more budget-friendly alternative, Champagne Toast and Tea Rose three-wick candles from Bath and Body Works are also absolutely perfect.

Feature and hero image credit: AirBnB Newsroom

Source: lifestyleasia.com

Apache is functioning normally

On Friday afternoon, my real estate agent called with good news. 

“Congratulations!” she said. “You just sold your house.” 

The agent wished me well and said that she would appreciate a review on her website. And that was that!

A little backstory: The four-bed, 1.5 bath house in the Poconos showed well and I priced it very competitively – at $269,000. Within 72 hours of it being listed on April 1, I had two full-priced offers in hand and expected to receive a third. I wanted to close before May 1, so I selected a buyer who was already in underwriting.

My agent exchanged a few emails with the buyer’s agent over a few minor repair requests, but this was all buttoned up very quickly. 

My personal experience speaks to a data trend we’re seeing with agent commissions – when the deal closed, the agents received the full 6% – $16,140, which they’d split evenly.

I had sought out the agent because she had the best track record in the area, worked with a lot of investors on the buy side, and had a history of closing quickly. She made clear in our first conversation that the commission would only drop to 5% if she also found the buyer. 

Unlike loan officers, whose commissions are highly regulated by the government, real estate agent commissions are based largely on long-standing industry practices and market forces. 

According to RealTrends’ historical data, agent commissions reached a high point in 1991 at an average of 6.10% and fell to a nadir of 4.94% in 2020 before climbing to 5.06% in 2021 and 5.32% in 2022. 

What’s especially interesting is that unlike average or low-performing agents, top-performing agents simply don’t lower their commission rates very often. 

“I think one of the underreported factors that we first noticed back in 2020 was that the top-performing individual agents and teams were grabbing a rapidly increasing share of the market — a trend that continued in 2022,” Steve Murray, a senior advisor for HW Media, told my colleague Tracey Velt. “If we were to look at the average commission rate for top agents and teams, we would find that it mirrors these results.”

By that measure, we might expect commissions to remain elevated for the foreseeable future. 

It wasn’t so long ago that experts said the internet would drastically bring down agent commissions. They were wrong. Relatedly, discount brokerages have promised big savings to sellers for decades. They’ve never caught on.

I briefly considered a “listing only” agent, but chickened out. No one wants to be the fool who steps over dollars to pick up pennies. 

Because selling a home is a high-stakes, low frequency transaction, the vast majority of homeowners stick with full-price brokers and bake the fee into the sale price. 

But what happens when that calculation collides with the worst period of housing affordability in decades?

Two forces could quickly change the calculus – inventory shortages and strong demographics demand, as well as the specter of class-action lawsuits that attack the traditional agent commission structure. 

The legal threat that looms largest is what’s known as the “Moehrl case.” The National Association of Realtors and several of the country’s top real estate brokerages are going to trial in a class-action commissions lawsuit that has potential damages of $13 billion. The plaintiffs essentially argue that sellers are subsidizing buy-side agents and it’s an anti-competitive practice that lacks transparency. 

If the NAR and brokerages lose, buyers would likely have to negotiate commissions with their own agent.

The case applies to sellers who paid a commission between 2015 and 2020 but could also apply to “current and future” sellers across 20 MLSs. Should the NAR and brokerages lose the Moehrl case, commissions would almost certainly fall. We could also see portals like Zillow step in and create a platform for buyers to negotiate commissions with agents. The more comfort people gain in negotiating commissions through a portal, the more commission discounts we would see.

We are also seeing new models proliferate, albeit on a small scale and in targeted markets. Opendoor in the fall launched “Opendoor Exclusives,” an Amazon-like marketplace for off-market deals that don’t involve real estate agents. See the house? Like the price? Click the button and buy it. Real estate industry consultant Rob Hahn also recently launched Decentre PX, an online auction marketplace that will allow homeowners to sell without having to pay a commission. In a world of ultra-low existing home sale inventory, where many buyers still have multiple bids and can sell their homes quickly and at full price, I expect other models that put pressure on agent commissions to gain some headway. 

Still, it would be foolish to bet against the remarkably resilient traditional real estate commission model. Over the decades it has survived scrutiny from the Justice Department, beaten discount brokerages in federal court, and has even persevered in the Internet age. Consumers have more information than ever, but rarely choose to go it alone or even with discount brokerages or listing-only agents.

Like me, when sellers are dealing with one of the biggest transactions of their lives, they’re too chicken to try the alternatives or simply don’t believe it’s worth the risk.

DataDigest is a newsletter in which HW Media Managing Editor James Kleimann breaks down the biggest stories in housing through a data lens. Sign up here! Have a subject in mind? Email him at [email protected]

Source: housingwire.com

Apache is functioning normally

So the inevitable happened – the U.S. stock market corrected after questions about the questionable Chinese economy sparked a global selloff.

Over the past few trading days, the Dow, Nasdaq, and S&P 500 have all fallen by more than 10% from recent highs, the first time this has happened since 2011.

Everyone will tell you it was a long time coming, yet when it actually came, it still sent shivers down many a spine.

While everyone is generally freaked out, you might start to see some silver linings in the mortgage and real estate world, the most obvious one being lower mortgage rates.

Lower Rates, Sweet?

At first glance, most mortgage guys and gals will tell you it’s good news, that mortgage rates will be lower as a result of the correction that could eventually turn into a bear market (20% decline).

The basic reasoning being the flight to safety, otherwise known as dumping stocks in favor of bonds, which pushes yields down and interest rates along with it.

But how much are interest rates really going to fall from current levels? They were already pretty darn low. And is the decline enough to make up for your stock portfolio’s massive losses?

More importantly, were you banking on those assets to qualify for a mortgage, to make your down payment? If so, you certainly don’t want to liquidate now, do you?

Conversely, the lower interest rates can be locked in today for the next 30 years, while the losses experienced over the past week will probably reverse and move higher during the next three decades. Except for the stocks that don’t make it out alive…

More Home Buyer Competition

If rates fall back to recent lows, that might add to the competition that is already overwhelming the overheated housing market.

Some folks may have lost interest recently, but with low rates making headlines again, there might be renewed interest.

While the low rates are undoubtedly good for those looking to refinance, prospective buyers might be forced to compete with a larger number of eager would-be homeowners.

Let’s not forget the Chinese either. Their stock market has crumbled, so they might be looking to park their cash in the United States, which is generally deemed a safer place to go when things get ugly.

They’ve already been buying real estate here, but they might increase those purchases as things deteriorate at home.

This just means even more competition – and they don’t care about low interest rates because they generally pay cash for the homes they acquire.

Will Home Prices Get Hit Next?

This stock market correction certainly has me wondering if home prices are next.

I think just about everyone watched the stock market climb back from its massive fall that corresponded with the housing crisis, wondering why it kept on rising.

After a while everyone kind of ignored the warnings of lofty valuations and kept buying in. Perhaps we got a bit ahead of ourselves.

Is the housing market the next shoe to drop, or is this just a temporary setback related to global growth concerns?

One can absolutely make the case for a home price correction as well, given how much property values have risen over the past few years.

Just surf on over to Redfin or Zillow and you’ll be able to see the meteoric rise of a given property’s value by scrolling down to the transaction history.

Most properties have appreciated by 50% or more in just a few short years, and home prices have reached new all-time highs in a number of states.

Sure, you have to account for inflation, but prices are still looking quite frothy as they have for some time.  If the stock market is tanking and home prices are sky-high, well, I don’t know…even the California Association of Realtors is having trouble wrapping their heads around it all.

They recently said, “the significant disparity between what home buyers can realistically afford and actual home price is discouraging,” and they’re the ones trying to sell you a home!

Now before you freak out, take note that the best thing to do during a correction is nothing. Don’t panic, don’t sell, but don’t necessarily buy either. Just hold tight and do whatever you were planning on doing before this all came along. Just know the risks.

Source: thetruthaboutmortgage.com

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When my husband started using a virtual wallet, I was concerned. We share a joint credit card and I was bothered about the security side of carrying around credit card information on a cell phone. In my mind, paying for things with your cell phone seemed too easy and a bit dangerous.

Through a combination of reassurance from my husband and a significant number of Google searches on “are virtual wallets safe,” I began to feel more comfortable with the idea. 

I know I’m not alone when it comes to questions about the safety of virtual wallets. So, let’s talk about it. What are virtual wallets and, most importantly, are they safe?

What’s Ahead:

What are virtual wallets?

A virtual wallet, sometimes referred to as an e-wallet, is an electronic wallet that lives on your mobile device. Virtual wallets can store all of your payment-related information including credit cards, debit cards, rewards cards, membership cards, and coupons, allowing you to pay for things electronically. No more trucking around your bulky wallet or disorganized purse. 

Depending on the type of mobile device you use, you may have a virtual wallet already installed on your phone. For instance, iPhone users will have access to Apple Wallet. Other virtual wallets can be obtained by downloading an app onto your mobile device.  

Virtual wallets vs. mobile wallets

The terms virtual wallets and mobile wallets are often used interchangeably. However, there is a difference. A mobile wallet is a type of virtual wallet that can be accessed by downloading an app on a mobile device like a smartphone or wearable watch. 

A popular example of a virtual wallet is PayPal. However, when PayPal is used on a mobile device it can function as a mobile wallet. 

Popular examples of mobile wallets include Apple Pay, Samsung Pay, and Android Pay. 

Banks like Chase, even offer digital wallets. With Chase accounts, you can get Chase Pay®, which allows you to simply and securely use your phone to make payments.

What are the most popular virtual wallets?

There are a variety of virtual wallets available for you to choose from. Some of the most popular virtual wallets include:

  • Samsung Pay.
  • Apple Pay.
  • Android Pay.
  • Chase Pay.
  • PayPal.
  • Google Wallet.
  • Venmo.
  • Zelle.

You can also check out wearables that offer mobile payment options like Garmin Pay and Fitbit Pay. 

From a global perspective, virtual wallets like Alipay and WeChat Pay which are both based in China, service millions and millions of users.  

How do I use a virtual wallet to make a payment?

While each virtual wallet will vary, there are some general steps associated with using an e-wallet. 

The first thing you’ll need to do is launch or install a virtual wallet app. Next, you will have to add a new credit card or debit card. To do this you can take a picture of your card or enter the details manually. 

When you’re ready to make a payment, you will launch the app and then choose the credit or debit card you want to use.

When it comes to actually making the payment, most smartphones use a technology called near field communication (NFP). NFP allows you to simply hold your phone above the payment pad or tap the payment pad to pay for your purchase. 

However, not all mobile devices are equipped with NFP. In this case, you can use a mobile wallet like PayPal. Instead of tapping your phone onto the pay pad, you use your mobile phone number and a pin to make your payment.  

Are virtual wallets safe?

When I heard about virtual wallets my first question was, are they safe? It seemed a bit risky to be carrying around all of my payment information on my phone. I mean, what if I lost my phone? Then what? Could someone hack in and access my virtual wallet?

It was this fear and lack of trust that prevented me from using a virtual wallet for a long time. However, virtual wallets are arguably even safer to use than your regular plastic credit or debit cards. 

First, digital wallets eliminate the potential to expose important information like your credit card number, your pin, or the CVV number on your credit card. When you pay for something with your digital wallet it uses a process called “tokenization.” This means that your sensitive info (like credit card numbers) is removed and replaced with a one-time-use number that is generated by an algorithm. So, none of your sensitive data is ever made public in any way. Unlike when you swipe or tap a credit card. 

Second, all of your payment information is encrypted. When you add a new debit card or credit card to your virtual wallet the information is encrypted and stored in the cloud. Even if someone steals your phone they would need your fingerprint or your passcode to access your virtual wallet. 

On the other hand, if you drop your wallet somewhere or get pickpocketed, your credit cards can be easily used and the information can be stolen. 

Is it easier for hackers to access your virtual wallet vs. your credit/debit card?

While no payment option is 100% hacker-proof, a physical credit card is much more susceptible to being hacked than a card in your virtual wallet. As I mentioned above, digital wallets provide multiple layers of security that aren’t present when it comes to your plastic credit card. 

A physical credit card presents more opportunities for thieves or hackers to get your information. If someone steals your credit card they can easily make a purchase online, or even in a store as many merchants don’t confirm that you are the actual cardholder. 

A virtual wallet requires a more intense authentication process that involves a password or proof from a biometric marker (fingerprint, retinal scan). Not to mention that you have to be able to unlock the phone before you can even gain access to the virtual wallet. There are simply more security steps involved. 

If you believe that your virtual wallet has been compromised or you’ve lost your phone, it’s easy to suspend all payments. For instance, with Apple Pay, if you put your phone into lost mode, it will automatically suspend all of your payment cards. This is much easier than having to call up each bank or financial institution to cancel your cards if you lose your physical wallet. 

Additionally, when you use a virtual wallet on your phone you also have the option of installing apps that will help you to locate your phone. So, if it is stolen the thief will have to figure out how to open your phone, won’t be able to authenticate, and you will be able to track their location. 

Is the money in your virtual wallet FDIC insured?

The Federal Deposit Insurance Corporation (FDIC) has been around since the 1930s. It’s their job to ensure stability and public confidence in the financial system. The FDIC insured all deposit accounts including checking, saving, money market deposit accounts, and certificates of deposit up to a standard amount of $250,000 per depositor, per insured bank. 

When it comes to whether or not your virtual wallet is FDIC insured the answer is a bit murky. However, as a rule of thumb, if your money is stored within a non-banking institution then the money is not insured. For instance, PayPal and Venmo are not considered banking institutions, so any money stored in these apps is not FDIC insured. There are some exceptions including Google Wallet. According to Yahoo Finance!, as of 2015 money stored in Google Wallet became FDIC insured. 

Before you assume that any funds stored in your mobile wallet are FDIC insured, make sure you thoroughly investigate.

The pros and cons of virtual wallets

Pros:

  • Security. Despite my initial reservations about the security of virtual wallets, security is actually one of it’s biggest benefits. Because virtual wallets eliminate the need to use credit card numbers, CVVs, or pins, it makes them impervious to hacking.
  • Convenience. With a virtual wallet, you no longer have to carry around a wallet or a purse. You will also never have to worry about forgetting a particular credit card or rewards card at home because they are all nicely organized on your phone.  
  • Time-saving. Paying with a virtual wallet can also save you time. No more waiting for a salesperson to swipe your card or enter your number. 
  • Contactless payment. Many virtual wallets eliminate the need to touch the germy buttons on a debit machine or pass your credit card from your hand to the merchant. It makes for a clean and touchless payment experience. 

Cons:

  • Not universally accepted. One of the main challenges associated with using virtual wallets is that they aren’t accepted by all retailers.
  • Compatibility. Not all virtual wallets will accept all credit cards. While most mobile wallets are accepted by the big banks, some business credit cards might not be accepted. You can check with your bank or log onto the mobile wallet website to confirm which cards are accepted.
  • Trust. As I admitted, a lack of trust was the reason I put off using a virtual wallet. And, I know I’m not alone. While virtual wallets offer additional security over a credit card this is not necessarily the shared perception among all Americans. 
  • Battery. Unlike a conventional purse or wallet, your phone requires battery power to be used. If your phone runs out of batteries while you’re shopping, you can’t make a purchase until you recharge. 
  • Variability. Not all virtual wallets will allow you to store all of your card information. For instance, some e-wallets will permit debit and credit cards only while others will permit everything from credit cards to reward cards and airline tickets. 

Who should use a virtual wallet?

Virtual wallets are available to anyone with a desktop or mobile device. However, when it comes to whether or not you should use a virtual wallet there are a few questions you can ask yourself to decide if it’s right for you. 

Do you want to increase your security?

Virtual wallets provide additional security features that just aren’t available for plastic debit or credit cards. If you want encryption and multiple steps of authentication, then perhaps a virtual wallet is the right choice. 

Do you value time savings and convenience?

If you enjoy online shopping, virtual wallets can save you a lot of time when it comes to paying for your purchases. No more time wasted on manually entering your credit card number, expiration date, and CVV code. I mean, we’re not talking days or weeks in time savings, but a few minutes here and there adds up over the long haul.

Are you always looking for your credit card?

A virtual wallet provides a single organized location for all of your payment information. So, if you’re someone who is constantly leaving your credit card in your coat pocket or forgetting to bring your rewards cards when you go shopping, a virtual wallet could help to keep you more organized. 

Who shouldn’t use a virtual wallet?

While virtual wallets offer a number of perks, they aren’t necessarily the right payment tool for everyone. Here are a few additional questions to ask yourself to see if perhaps a regular old wallet or purse is a better option for you. 

Do you feel comfortable with a virtual wallet?

While virtual wallets are growing in use, there is still a segment of Americans that don’t trust them. If you feel uncomfortable or unsafe using a virtual wallet then you shouldn’t. While virtual wallets are arguably safer than using a physical credit card or debit card, you should stick to using what you feel most comfortable with. 

Are you very concerned with your privacy?

While a virtual wallet can add some additional security over a plastic credit or debit card, it also introduces some new privacy concerns. When you use your virtual wallet, retailers and financial institutions can potentially collect data on the types of purchases you are making. This can then be used to help retailers develop targeted marketing. I mean, this is already happening if you are using social media, but it’s something to be aware of. 

Do you continually forget to charge your mobile device?

If you are notorious for walking around with a dead smartphone then maybe you should skip the virtual wallet. Bottom line, if your phone is dead you can’t pay for things. 

Summary

Like any technology available for use, virtual wallets come with pros and cons. You will have to decide if the added security features and convenience outweigh any trust or privacy concerns that you might have. 

It took me some time to become comfortable with the idea of using a virtual wallet. I was not one of the early adopters. I’m an old Millennial and I’ve been using physical debit and credit cards for decades. As a result, it took a lot of research and just trying it before I saw the perks. For me, the benefits outweigh the risks. But, it’s up to you to decide if a virtual wallet is right for you.

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Source: moneyunder30.com

Apache is functioning normally

“People want to make money fast, but it doesn’t happen that way.” — Warren Buffett

Over Christmas, I read Roger Lowenstein’s fantastic biography of Warren Buffett, one of my financial heroes. Because I currently prefer to invest through index funds, it was fascinating to read how Buffett has been able to make billions by purchasing individual stocks.

Next, I picked up the new book from David and Tom Gardner: The Motley Fool Million Dollar Portfolio. It was the perfect follow-up to reading about Buffett. “This book is about picking great stocks,” write the authors in the introduction, and it’s true. Over the subsequent pages, they describe a variety of techniques for finding individual stocks that are worthy of investment (and not just speculation).

Stocks that don’t suck
I don’t write much at Get Rich Slowly about investing in individual stocks. For one thing, I have a pathetic track record in choosing good companies. In the past, I’ve been a speculator and not an investor. Some of my choices include:

  • CRA, at its peak
  • PALM, on the day of its IPO
  • WAMU in the autumn of 2007
  • SHRP, last January

Fortunately, I’ve never had huge sums to invest in these speculative bids. All the same, I’ve lost thousands of dollars in bids to get rich quickly in the stock market. Because of my experience, I’ve come to admire the virtues of indexed mutual funds.

All the same, I recognize that it is possible to build a great investment portfolio from individual stocks. Many GRS readers are interested in doing just that. And I, too, would like to allocate some portion of my money to buying stocks — now that I have the urge to speculate out of my blood. In their book, the Gardners write:

If you have the time, ability, and interest, individual stock investing is the single best way to build you own million-dollar portfolio.

Though the authors advocate picking individual stocks, they’re as wary of fees as any index fund investor. They believe active trading is dumb. They’re advocates of buy-and-hold. The Gardners also write that there are two components to investing well:

  1. Picking the right stocks.
  2. Building a balanced portfolio (i.e., diversifying).

“In the end,” they write, “you want 100% of your money invested in companies that don’t suck, and 0% in companies that do.”

Investment strategies
Each chapter of Million Dollar Portfolio explores a specific investment strategy. The authors note that “each [strategy], practiced well, can and does beat the market.” Some of the methods covered include:

  • Dividend investing, which involves buying stocks that produce consistent income through the use of “dividends”. MDP argues that dividends are the investment world’s “allowance”. When you own a dividend stock, you receive a periodic payment just for investing.
  • Value investing focuses on buying companies trading for less than what they’re worth. It’s about buying good companies at a great price. “The excitement of blue-chip value investing comes from looking at long-term charts of what value stocks do as a group over a period of decades.”
  • Small-cap investing attempts to find “hidden gems” — stocks from smaller companies that tend to be ignored by large institutional investors.
  • Growth investing. Growth stocks are those expected to produce above-average earnings over the near future. Increased earnings lead, in theory, to increased profits, and to higher share prices.
  • International investing, which allows you not only to diversify, but also to find stocks in other countries that might be better than those in our own.

The authors lay out the basic techniques of each style, and then provide case histories. Along the way, they explain investing concepts like P/E ratios, book value, “market cap”, rebalancing, and more. Though they write about individual stocks and not index funds, much of the advice is familiar: buy and hold, diversify, etc.

Million dollar portfolio
Million Dollar Portfolio includes more than just information about choosing stocks. The book also features:

  • A chapter about CAPS, the Motley Fool stock-researching tool (which Get Rich Slowly has covered before).
  • A discussion of asset allocation and diversification.
  • A short section on the financial collapse of 2008. The Gardners look at the causes, the reactions of big investors, and the prospects for small investors like you and me.

The Gardners also stress the importance of investing as soon as possible. They write that the biggest mistakes that American investors make are:

  1. Never starting.
  2. Starting too late.
  3. Picking poor stocks.

As many have argued, the best time to begin investing is now, whenever now may be. Because of the power of compounding, time is the investor’s best friend.

I was ready to hate this book, but I didn’t. I found it fascinating. I loved the information about how to evaluate stocks. I’m not ready to abandon index funds, but I am eager to learn more about dividend investing, the method that seems best suited to my personality and goals.

I also like that the book doesn’t just tout successes. Each chapter describes a particular investment strategy, explains the method, and then illustrates it with two or three successes. But each chapter also includes a real-life mistake the authors have made. These examples of choices gone wrong are often more instructive than the picks that worked!

Note: I recently had a chance to interview author David Gardner. Look for an excerpt from that conversation later today.

Source: getrichslowly.org

Apache is functioning normally

Enjoy complimentary access to top ideas and insights — selected by our editors.

As we look forward to the start of Q2 2023 earnings, financials of all descriptions  are facing rising levels of liquidity risk. Banks are fighting to keep deposits on the books, while independent mortgage banks (IMBs) worry about low volumes and access to wholesale warehouse credit. But these short-term considerations may be missing the big picture staring us all in the face.

Over the past several decades, increasing volatility in interest rates caused by the manic policy swings of the Federal Open Market Committee, caused a structural change in the mortgage market. Refinance opportunities became more frequent and larger in terms of volumes, allowing the industry to carry more overhead per dollar of volume. Veteran mortgage executive Bill Dallas provided some insight into that question in an interview by Maria Volkova in National Mortgage News: 

“What’s interesting is almost none [of my clients] have a lot of perspective about the mortgage business. A lot of them have never been in an environment that is predominantly purchase. I was raised in that environment. I spent my first 20 years in an environment where we didn’t have refinances really. Everything was a purchase. I think they’re struggling with that. And then the second shoe that hit them all is margin compression, and product compression, which they weren’t expecting. Almost everybody’s business model that I saw underestimated the amount of compression on the gross revenue side of their business.”

Remember the glib characters who were talking about an end to Fed rate hikes and 5% mortgage loans earlier this year? Now, with home prices again rising and the U.S. consumer essentially ignoring the FOMC, the question comes as to how much higher do interest rates need to go in order to cool off the housing sector? Moreover, there is a growing sense among economists that low single-digit interest rates maintained by the Fed during 2020-2021 may have caused more damage than benefit. 

For mortgage lenders, the prospect of interest rates staying at or above current levels suggests a return to a business model that is predominantly focused on purchase mortgages. Since the cost of closing a purchase loan is three to four times the cost of a refinance loan, the expense structure of the industry must change to accommodate. For many lenders accustomed to reaping profits from refinance transactions, a return to purchase lending likely means the end of the road.

Adding to the already substantial challenge facing lenders in the shift to a purchase loan market is the continuing distortion of the money markets caused by the Fed. Because the FOMC so far refuses to sell its $3 trillion portfolio of mortgage-backed securities, the shape of the yield curve is inverted, with the yields for securities around 10-12 years in maturity far lower than short-term rates. The $3 trillion in MBS owned by the Fed is a dead weight holding down long-term bond yields.

What this means in layman’s terms is that lenders are losing money on loan sales into the secondary market. Since the price for Fannie Mae 6s in July is above current prices, lenders are losing money on every loan they carry from close to secondary market sale – the opposite of a normal market. This inverted or “contango” market is usually seen in physical commodities when prices rise suddenly, but by “going big” in 2020, the Fed has managed to disrupt the term structure of interest rates to an alarming degree.

When lenders do actually sell the mortgage loan into the secondary markets, the execution is likely to be less than a point premium.  Indeed, many lenders are forced to sell the servicing with the loan in order to enhance the overall sale proceeds. Given the toppy valuations for mortgage servicing rights, selling is not the worst thing in the world, but the list of IMBs monetizing MSRs is growing as operating cash flows fall. 

For example, United Wholesale Mortgage completed two bulk MSR sales as well as two excess servicing strip sales in the first quarter of 2023, based on servicing assets with a total UPB of approximately $98 billion. Net cash proceeds approximated $650 million from MSR and excess sales in Q1 2023 or 66 bp on the total UPB.  

UWMC reported an operating loss of $138 million in Q1 2023 and a negative mark on the firm’s MSR over $330 million – due to falling interest rates!  The machinations of the FOMC have actually increased market volatility so much that firms like UWMC are taking negative marks on MSRs when interest rates are supposed to be rising. What’s wrong with this picture?

The mortgage industry faces several threats. In the near term, rising rates are hurting volumes and pricing refinance transactions out of existence. Secondary market execution is poor and likely to get worse, especially as lenders see carry on closed loans forced deeper into the red. How much money will mortgage firms lose before they simply shut their doors?

“The Federal Reserve’s Dot Plots indicate that up to two more hikes could be on the table for 2023,” writes Erica Adelberg of Bloomberg. “If this occurs, mortgage carry could be even further challenged relative to funds, which could push forward mortgage prices even higher relative to current months.” 

But perhaps the bigger existential question is whether the post-COVID world will be one with less interest rate volatility from the FOMC and an effective floor under interest rates that is well above the past decade. How will the industry look a year from now if mortgage rates stay at or above 7% for an extended period of time?  Will the growth in market share of IMBs be reversed over the next decade as they slowly sell servicing assets to survive?  

With interest rates rising slowly and inflation measured by home prices remaining stubbornly elevated, the world of mortgage lending in 2024 and beyond may look more like several decades ago than the past five years. If the FOMC takes the proper lesson from the errors of the COVID period, then the future movement of interest rates is likely to be muted. 

As opportunities for refinancing existing residential loans shrinks relative to the overall business of mortgage lending, the structure of the industry and the flow of mortgages into the capital markets will change. Expenses per loan will rise, headcount in the industry will fall and prepayments on existing loans will fall dramatically. And once again, the mortgage finance industry will be forced to remake itself to fit this new reality. 

Source: nationalmortgagenews.com

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Senators Tina Smith (D-Minn.) and Mike Rounds (R-S.D.) introduced this week new legislation that aims to address a shortage of affordable housing in rural communities. The lawmakers say the bill would represent “the most significant Rural Housing Service reforms [in] years.”

If passed, the bill, known as Rural Housing Service Reform Act of 2023, would “improve federal rural housing programs, cut red tape, and strengthen the supply of affordable housing” and would “improve and build upon a number of U.S. Department of Agriculture (USDA) rural housing programs,” according to a press release from Sen. Smith’s office about the bill.

“This legislation makes important improvements and updates to the Rural Housing Service that will create and preserve affordable housing opportunities in South Dakota,” said Sen. Rounds. “As we face an affordable housing crisis across the nation, I look forward to working with my colleagues to get these important, bipartisan updates signed into law.”

In particular, the bill aims to fix what the senators describe as a “longstanding problem for [515] properties that were financed by the USDA decades ago and now have maturing mortgages, by making it easier for non-profits to acquire those properties and by decoupling rental assistance so that assistance doesn’t disappear when those mortgages mature.”

Otherwise known as “rural renting housing loans,” USDA Section 515 loans are “direct, competitive mortgage loans made to provide affordable multifamily rental housing for very low-, low-, and moderate-income families, elderly persons, and persons with disabilities.”

The bill would make it easier for non-profits to acquire properties with Section 515 loans. It would also decouple the related rental assistance so that the assistance doesn’t disappear when the mortgages mature.

In addition, the bill would make permanent a USDA pilot program that provides mortgages to Native American communities through partnerships with community development financial institutions (CDFIs).

Technology is also a focus of the bill. In addition to the other priorities, the bill would allow the USDA to make better investments in its information technology infrastructure. The senators contend that this would allow the USDA to “process loans more quickly and with less staff time wasted on paperwork or manual data entry.”

Another area of focus are the USDA’s methods of measuring incomes, which are “outdated,” according to language in the bill. If passed, the bill bring those methods in line with the way incomes are measured by HUD.

The bill would also “modernize” the USDA’s foreclosure practices to better ensure affordability, the senators said.

Smith and Rounds have been heavily focused on affordable rural housing issues recently, with both senators spearheading hearings on the topic in order to develop a plan.

“Without a safe, affordable place to live, nothing else in your life works. Not your job, not your education, not your health,” Sen. Smith said in a statement. “We know that the housing crisis is hurting communities across the country, and the problem is particularly acute in rural places. This legislation is the direct result of bipartisan hearings and conversations with stakeholders who helped identify ways we can make federal rural housing programs work better for people struggling to find a safe, affordable place to live.”

Natalie Maxwell, managing attorney for the National Housing Law Project, recently told The Hill that approximately 560,000 renters who live in apartments financed by Section 515 are under threat due to the mortgages maturing or due to a loss of eligibility related to other reasons.

“In rural communities, the Section 515 program has been a critical source of affordable housing especially for low-income seniors and people with disabilities,” Maxwell told The Hill. “Congress can and must do more to preserve these properties for families living in poverty.”

The U.S. Department of Housing and Urban Development has also turned its attention toward the needs of rural areas recently, including through proposals that seek to expand broadband internet access to a greater number of rural communities.

Source: housingwire.com

Apache is functioning normally

SAN FRANCISCO — 

Gia Gray seems like a dream client for any bank: a well-off family doctor living in an exclusive Bay Area town, in a 5,000-square-foot mansion with a master bath bigger than my office.

With a credit score topping 800, she expected little drama when she and her husband decided to refinance their Danville home and two other investment properties in 2020 to capture some of the lowest interest rates in recent history — remember when 3% loans were a thing?

But after endless excuses and delays in her applications, “I started feeling Black,” Gray told me. Her bank, Wells Fargo, flat out turned her down on the investment properties, she said, and slow-rolled the application on her residence, coming up with new requirements as the process dragged on.

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“At the visceral level, I felt that something was not right,” she said.

Across the country, other borrowers have had similar experiences. Earlier this year, a federal court in Northern California, where Wells Fargo is headquartered, consolidated the claims of Gray and seven other Black plaintiffs into one case that may be certified as a class-action suit in coming months.

The lead attorney in the case, Los Angeles-based Dennis S. Ellis, says up to 750,000 minority customers nationwide — Black, Asian and Latino — could have been affected by what he sees as a pattern of discriminatory lending that left qualified borrowers denied or pushed into higher interest rates and more expensive loans.

It’s a form of modern-day economic redlining, he told me, that if proven true inflicted pain that resonated beyond the borrowers, many of whom lost out on a chance to save hundreds or thousands off their loans each month. It also hurt Black and minority communities as a whole, because it took away an exceptional chance to build generational wealth through affordable homeownership.

“Realizing the American dream of owning your own home is not just about having a safe place to live,” Ellis pointed out. “It’s about securing the future of generations that follow because of the incredible financial stability that homeownership provides.”

Ellis contends that the problem developed in part because Wells Fargo was short-staffed during the pandemic and relied on flawed algorithms and an automated system that may have had discrimination baked into it.

But it wouldn’t be the first time Wells Fargo was found to have discriminated. In 2012, the U.S. Department of Justice won a $175-million settlement against the bank, the second-largest fair-lending settlement in the department’s history, over allegations that Wells Fargo engaged in a pattern or practice of “discrimination against qualified African-American and Hispanic borrowers in its mortgage lending from 2004 through 2009.”

The cities of Oakland and Philadelphia have also sued Wells Fargo for discriminatory lending practices; Philly settled its case for $10 million in 2019.

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Wells Fargo has been accused of holding fake job interviews with minority candidates for posts that had already been promised to other applicants, low-balling home appraisals and ignoring issues of discrimination that, as they come to light, may be harming the bank’s bottom line.

Wells Fargo has denied all of the allegations, including those made in this lawsuit. In a statement, the company said it was confident it was following all required guidelines and that its underwriting practices are consistently applied regardless of a customer’s race or ethnicity.

“These allegations against Wells Fargo stand in stark contrast to the company’s significant and long-term commitment to closing the minority home ownership gap,” the statement read.

It’s not just owning a home, though. It’s owning it on good terms.

Google tells me that a $500,000 30-year loan at 3% interest costs about $900 less a month than a loan at 6% interest — about $324,000 over its lifetime. For the folks who weren’t able to refinance, that’s money lining corporate pockets instead of paying for college or retirement or funding other investments.

The lawsuit alleges that in 2020, “at a time when millions of white Americans were able to take advantage of historically low-interest rates for home loans,” Wells Fargo approved 47% of refinancing applications from Black homeowners, 53% from Hispanic and/or Latino homeowners, and 67% from Asian American applicants. That compares with 71%, 79% and 85%, respectively, for these same groups across all other lenders, according to the lawsuit.

That same year, Wells Fargo approved 71% of residential refinancing applications from white borrowers.

Ouch, Wells Fargo. Those are some dismal numbers.

The lawsuit also alleges that federal data show Wells Fargo was more likely to approve refinancing applications from low-earning white borrowers than high-earning Black borrowers. Analyzing data from 8 million refinancing applications filed in 2020, Ellis and his team found white applicants earning less than $63,000 a year were “more likely to have their refinancing application approved by Wells Fargo than Black refinancing applicants earning between $120,000 and $168,000 a year,” according to the lawsuit.

The insidiousness of financial discrimination lies in how hard it is to prove on an individual basis — and in how hard it is to even believe it’s happening. The loan process can be so remote and impersonal — even more so during the isolation of the pandemic — that Gray and her co-plaintiffs were at first unsure if what they felt was really taking place.

Last week, Gray met two of those other borrowers in person at a news conference in San Francisco. I spoke with the three of them in a coffee shop afterward, but mostly I just listened, because there was a tremendous sense of relief and camaraderie as they shared how similar their experiences had been.

Until the lawsuit, Aaron Braxton, a Los Angeles homeowner, had been left wondering, “Are they doing this to everybody, or are they only doing this to Black folks?” he said.

Braxton was one of the first to file a complaint in 2020. A noted screenwriter, playwright and teacher, Braxton had owned his home in a historically Black neighborhood near USC for about 18 years and owed a fraction of what it was worth when he went to refinance his Wells Fargo mortgage. Like Gray, it was one thing after another, despite never missing a payment and having good credit. By the time Wells Fargo approved his loan, the interest rate had climbed and so had his frustration.

“I told them, ‘I am going to sue you. I don’t know how I’m going to sue you, but I am going to sue you, because I know I am not the only one,’” he said.

Gray was scrolling through her phone during the pandemic lockdown and came across a story about Braxton. “It was like a bright bulb,” she recalled, “and I said, ‘Oh, my God, this happened to someone else.’”

Christopher Williams flew in from Georgia, where he owns a home and rental properties. He worked in the financial industry for decades, so when Wells Fargo offered him a loan at 3 points higher than he expected, he asked why. Williams said the bank couldn’t give him clear answers, and he too began to suspect it was about the color of his skin.

Now, Williams said he wonders how many people there are who accepted loans at higher rates or with higher costs without knowing it. “How many of those loans and lines of credit are on the books of Wells Fargo right now?” he asked.

Ellis will be in federal court in San Francisco for the lawsuit on Thursday, the anniversary of the death of George Floyd. He says like the movement Floyd’s death set off to address issues of social justice, he hopes this case can raise awareness of financial injustice and its toll — which he considers the “21st century battleground of civil rights.”

“Just as we’ve cried out against policing practices that kill Black lives, so we denounce Wells Fargo’s racially motivated banking practices that kill Black opportunity,” said civil rights attorney Ben Crump, who is also involved in the case.

Interest rates are not as compelling as the tragedy we witnessed with Floyd, but Crump and Ellis make an important point.

This is a capitalist joint.

Until we all have the same opportunities to create wealth, we’re left with the oppressed and the oppressors, who too often get away with strangling equity under the cover of paperwork and algorithms.

Source: latimes.com