Mortgage Origination Volume Falls 34%

Posted on June 07, 2017 by Laura Lam

black knight mortgage originations 6-2017Mortgage origination volume fell 34% in the first quarter compared with the fourth quarter, driven mainly by a 45% drop in refinances, according to Black Knight Financial Services’ Mortgage Monitor report.  Overall, lenders originated about $372 billion in first-lien mortgages in the first quarter – the lowest volume seen since the fourth quarter of 2014.  Purchase originations fell 21% compared with the fourth quarter but were up 3.0% compared with the first quarter of 2016, according to the report.

An ATTOM Data Solutions report also showed that a little over 1.4 million loans (refinance and purchase loans) were originated in the first quarter – down 30% compared with the fourth quarter and down 21% compared with the first quarter of 2016.  What’s unusual about the drop in refinances is the fact that mortgage rates remained more or less flat during the first quarter, with fixed-rate mortgage hovering close to 4%.

Ben Graboske, executive vice president for Black Knight Data & Analytics, says the drop-off in refinances stems, in part, from the increase in mortgage rates that came in the fourth quarter. He points out that the same thing more or less occurred at the end of 2013.  At that time, interest rates increased abruptly – similar to what happened at the end of 2016 – and originations slowed considerably. “The same dynamic is at work here,” Graboske said.

According to Graboske, refinance lending among higher-credit-score borrowers, who have largely driven the refinance market these past several years, saw a quarterly decline of 50%.  On the other end of the spectrum, he said that lower-credit borrowers (scores below 700) only saw refinance volume decrease by 24%. “This is worth noting as we monitor the future performance of 2017 originations,” he stated.  Graboske indicates that refinances, which tend to outperform purchase mortgages, are making up a smaller share of the market.  He also noted that the average credit score has been lowering with the average 1Q 2017 refinance credit score of 742, down from 751 in 4Q 2016.  “Both of these factors could have a dampening factor on mortgage performance,” said Graboske.

Perhaps more alarming for mortgage lenders is that purchase volume in the first quarter came in lower than had been forecast.  “Purchase originations were down 21% from the fourth quarter of 2016 … and marks the slowest growth rate Black Knight has observed in more than three years – going back to the fourth quarter of 2013,” he added.

Source:  Mortgage Orb/Black Knight

73% of Americans Have Financial Regrets

Posted on June 06, 2017 by Laura Lam

bankrate security 2Nearly 3-in-4 U.S. adults have financial regrets, according to a new Bankrate.com report. The most common is not saving for retirement early enough, followed by not saving enough for emergency expenses and taking on too much credit card debt. Taking on too much student loan debt is fourth, however, it tops the list among older millennials (27-36 year-olds). Fifth overall is not saving enough for your children’s education and sixth is buying more house than you could afford.

Baby Boomers are the most likely to regret not saving for retirement earlier; remorse over this issue grows steadily from age 18-62. It’s also the biggest financial regret for every household income bracket above $30,000 per year and a close second below that threshold (to not saving enough for emergencies).

The top financial regret deals with not saving – either for retirement or emergencies – among every income bracket, level of educational attainment, gender, race, political affiliation, census region and community type, plus every age group except the aforementioned 27-36 year-olds.

“I’ve never met a person who regretted saving money,” said Mark Hamrick, Bankrate.com’s senior economic analyst. “Better to decide now in favor of aggressive saving rather than wait too long to begin and be sorry later.”

Bankrate.com’s Financial Security Index dipped slightly to 104.0 from 104.8 in April. Still, it remains in positive territory for the eighth consecutive month (readings over 100 indicate improved financial security relative to one year previous).

All five components – job security, comfort level with savings, comfort level with debt, net worth and overall financial situation – indicate improvement from one year ago. The savings category has only been above break-even twice since polling began in Dec. 2010 (the other time was March 2017).

Women feel more comfortable with their savings than men for the first time since June 2016, although men still have a higher overall Financial Security Index score (104.7 versus 103.1 for women).

Source:  Bankrate

Home Prices Not Back To Pre-Crisis Levels

Posted on June 05, 2017 by Laura Lam

home prices 1Home prices increase a little more each month, even hitting new peaks in many markets, yet experts insist they are not back at bubble-era levels.  The most recent Case-Shiller results show home prices rose 5.8% from last year to the highest pace in 33 months.  Black Knight also released its Home Price Index Report, showing home prices rose to a median $272,000 in March. This represents a new peak in home prices, and a rise of 2.3% from the start of the year.

In fact, the chart from Calculated Risks shows home prices are nearing, if not level with, pre-crisis peaks, according to different measures of home prices such as the Case-Shiller index and CoreLogic’s HPI.

home priceds 2However, a report from First American Financial Corp. shows that while affordability is decreasing, home prices adjusted for changes in income and interest rates are still well below the pre-crisis level.  First American’s measure of affordability, what it calls real house prices, increased 0.7% in March and 11.5% from last year. However, they are still 32.5% below the housing boom peak in July 2006 and even 9.3% below prices in January 2000.

According to First American Chief Economist Mark Fleming, “Strong Millennial demand, a limited supply of homes for sale, and higher mortgage rates have all combined to impact the affordability of homes compared to a year ago.”

Using the same measures of home prices as the chart above, but adjusting for inflation, shows home prices, while higher than historic averages, are still well below bubble-era levels.  “Housing has definitely increased in price on an inflation-adjusted basis since the mid-70s, however improvements in financing, interest rates, different products etc., have increased people’s buying power and that may account for some of the increase,” said Brent Nyitray, iServe Residential Lending director of capital markets.

Source:  Housing Wire

What to Buy in June

Posted on June 02, 2017 by Laura Lam

gym memberWarm weather, wedding season, and hurricane season all bring discounts in June. Consumers will also find continuing sales on some items that were good deals in May. Here’s a look at the best things to buy this month from Cheapism.com.

Tropical Vacation – June signals the onset of hurricane season and sweltering temperatures in the Caribbean. For travelers willing to take their chances with the weather, this is the perfect time to scoop up deals on cruises and tropical vacation packages, especially for last-minute bookings.

Alaskan Cruise – Mid-June marks the end of the off-season for travel to Alaska, a popular summer destination. Travelers who visit this month can still find discounts and marvel at the midnight sun — the longest day of the year falls in June.

Gym Membership – As the weather improves and people move their workouts outside, June sales surface at gyms and health clubs that are running hard to sign up new members. Consumers who enjoy haggling should be able to negotiate a larger than normal discount on a gym membership.

Workout Gear – With more people wanting to get into swimsuit shape, retailers offer rock-bottom prices on fitness apparel. Think shoes, clothes, and accessories for the gym or outdoor workouts.

Lingerie – Victoria’s Secret’s famed semi-annual sale kicks off this month, bringing deals from the lingerie giant — and from its competitors. With cheap gym memberships also available in June, now is the time to acquire a few new pieces to complement a newly toned body.

Dinner For Dad – Father’s Day falls on June 18, and while there aren’t many sales on traditional Father’s Day gifts, national restaurant chains often advertise deals on dinner out — think buy-one-get-one entrees. Take advantage to treat dad this Father’s Day without spending an arm and a leg.

Dishes And Cookware – May ushered in deep discounts on cookware, between Mother’s Day and the dawn of wedding season, and many of those deals continue through June. Prices on dishware also start dropping as wedding season gains momentum. Dishes and cookware make practical graduation gifts for young adults moving out on their own.

Tools And Paint – The absolute best deals on tools are typically found in October or November, but a few bargains emerge around Father’s Day. Take advantage of the discounts for summer DIY projects that call for power tools or a coat of paint.

movie tixMovie Passes – June signals the onslaught of summer blockbusters. Big budgets and an audience eager to escape the heat spur movie ticket discounts and other incentives. Some theaters also show kids’ movies at bargain prices on weekdays in the summer. Starting in June, Regal Cinemas is charging only $1 for family favorites on Tuesdays and Wednesdays.

Foods In Season – June brings a fresh fruit and vegetable boom, an ideal time to get in the habit of buying local produce. Depending where you live, the fruits to buy include melons (watermelon and cantaloupe), berries (blueberries, blackberries, raspberries, and strawberries), and stone fruits (apricots, peaches, and nectarines). Kick off the grilling season with sales on the first crop of sweet corn, summer squash, green beans, and tomatoes, plus lettuce and cucumber for salads.

Doughnuts – National Doughnut Day falls on June 2 this year. Be on the lookout for free glazed goodness today from places such as Krispy Kreme, Dunkin’ Donuts, and Tim Hortons, as well as more unique doughnuts from independent shops and bakeries across the country.

Electronic Communications: A Growing Compliance Risk

Posted on June 01, 2017 by Laura Lam

smarsh surveyThe 7th annual Electronic Communications Compliance Survey from Smarsh reveals that finaical firms are struggling to keep up with the multitude of electronic communications channels.  More than half of respondents (52%) cited text messages as their current No. 1 source of non-email content compliance risk. About 33% of respondents cited social media communications as the greatest compliance risk, and 8% cited instant messaging.

The survey also found that almost half of firms have no oversight or retention of text messages.  “Firms need to leverage new and emerging channels to communicate with their customers and stay competitive, but they’re failing to manage the risk,” said Smarsh founder and CEO Stephen Marsh.

While the rise of mobile devices and social media as compliance risks is nothing new, what has evolved is the reason such communications channels are gaining increased traction.  A few years ago, channels like text messaging and social media posed less of a risk because financial services professionals focused their communications with clients on email. The rise of the Millennial generation has powered a shift in communication habits as these clients are accustomed to communicating via text and social media.  Some Millennials have made it clear that such channels are their preference when dealing with financial service professionals.

The challenge of keeping up with electronic communications channels comes amid a regulatory crackdown, with FINRA reporting almost 100 records cases last year and $22.5 million in fines levied, an increase of more than 400%.  Regulatory requests for electronic communications records have also expanded. Regulators are increasingly requesting communications records from such channels as LinkedIn, Twitter and Facebook in addition to email.

According to Ken Anderson, vice president of marketing at Smarsh, firms should re-balance their electronic communications portfolio to account for the fact that emerging communication channels are likely to bring the most risk. He said a combination of technology solutions and continuing education for employees is the best recipe for success.  “Firms that are proactive will be best-positioned to tackle any emerging trend,” Anderson explained.

Going beyond compliance, 88% of survey respondents see a role for electronic communications records in identifying risk factors. More than half (59%) of respondents use these records to flag potential fraud, market abuse and as a source of supporting documents when addressing HR issues.

Source: Smarsh

Mortgage Origination Volume Hits 5-Year High

Posted on June 01, 2017 by Laura Lam

mortgage volume 5-17First lien originations jumped in 2016 to $2.1 trillion, the highest point since 2012, according to a report from the Urban Institute.  Of these originations, the share of portfolio originations increased to 30.9%, up from 30.2% in 2015, the report shows. The GSE share increased to 45.9%, up from 45.7% the previous year and the FHA and VA share decreased to 22.8%, down from 23.3% in 2015.

The chart shows, unlike pre-crisis years, private-label securities no longer hold a significant share in the market. In both 2015 and 2016 the share of private-label securities totaled well below 1%.

mortgage volume 2 5-17

But despite the increase in originations to the highest level since 2012, profitability is down.  Originator Profitability and Unmeasured Costs (OPUC), formulated and calculated by the Federal Reserve Bank of New York, is a measure of originator profitability. OPUC uses the sales price of the mortgage in the secondary market and adds two additional sources of profitability: retained servicing and points paid by the borrower.

When originator profits are higher, mortgage volumes are less responsive to changes in interest rates, because originators are at capacity, the report explains. Driven by the post-Brexit decline in interest rates, the chart below shows OPUC rose sharply to $3.21 per $100 in July 2016. Since then it has declined to $2.29 in April 2017, the lowest level since January 2016.

For now, profitability remains low, meaning mortgage origination volumes could be greatly affected by the Federal Reserve’s decision in June over whether to raise interest rates.  Currently, experts claim that there will be several rate hikes this year, including one in June, however minutes from the May meeting show that rate hike isn’t guaranteed.

Source:  Urban Institute/Housing Wire

The Top 10 Careers for First-Time Home Buyers

Posted on May 26, 2017 by Laura Lam

home buyer careerAlthough home prices continue to rise, one degree stands above the rest as being the best for those who wish to buy at home closer to the start of their career.  Of the top 26 degrees that would allow graduates to purchase a home in four years, 22 of them involve engineering, according to a recent study from Realtor.com. The top degree enables buyers to purchase a home within 2.5 years of graduation.

“When it comes to homeownership, degrees in engineering really pay off,” realtor.com Senior Economist Joe Kirchner said. “It shows just how powerful a high starting salary can be when it comes to early home ownership.”  On the opposite end of the spectrum, education degrees have the longest path to homeownership with an average of 7 years.  While that may sound like a long time, Kirchner adds that by putting away 20% each month education professionals could obtain  a home by their late twenties or early thirties.

The analysis measures how long it would take to save for 20% down payment on a $250,000 home, based on the average starting salary by degree as reported by Payscale.com and saving 20% of one’s income per year. Here are the top 10 degrees that provide the fastest path to homeownership:

  1. Electrical Engineer
  • Starting Salary: $67,000
  • Savings per year: $13,400
  • Years: 3.7
  1. Electronics and Communications Engineering
  • Starting Salary: $68,000
  • Savings per year: $13,600
  • Years: 3.7
  1. Electrical and Computer Engineering
  • Starting Salary: $68,100
  • Savings per year: $13,620
  • Years: 3.7
  1. Nuclear Engineering
  • Starting Salary: $68,500
  • Savings per year: $13,700
  • Years: 3.6
  1. Computer Engineering
  • Starting Salary: $69,600
  • Savings per year: $13,920
  • Years: 3.6
  1. Chemical Engineering
  • Starting Salary: $69,800
  • Savings per year: $13,960
  • Years: 3.6
  1. Mining Engineering
  • Starting Salary: $70,200
  • Savings per year: $14,040
  • Years: 3.6
  1. Computer Science and Engineering
  • Starting Salary: $71,200
  • Savings per year: $14,240
  • Years: 3.5
  1. Physician Assistant Studies
  • Starting Salary: $85,200
  • Savings per year: $17,040
  • Years: 2.9
  1. Petroleum Engineering
  • Starting Salary: $96,700
  • Savings per year: $19,340
  • Years: 2.6

Source:  Housing Wire/Realtor.com

Mortgage Delinquencies Hit 8-Year High In April

Posted on May 25, 2017 by Laura Lam

black knight delinquencies 4 17The delinquency rate on first-lien mortgages (30 days or more past due) stood at 4.08% as of the end of April – an increase of 12.93% compared with March but a decrease of 3.58% in April 2016, according to Black Knight Financial Services’ First Look report.  It was the largest monthly increase in the mortgage delinquency rate in more than 8 years, the company says.

However, Black Knight notes that the increase was primarily calendar-driven due to both the month ending on a Sunday and March being the typical calendar-year low and largely isolated to early-stage delinquencies.  As of the end of the month, about 2.072 million loans were 30 days or more past due – an increase of about 241,000 compared with March but a decrease of about 74,000 compared with April 2016.

About 581,000 properties were seriously delinquent (90 days or more past due but not in foreclosure) – a decrease of about 8,000 compared with March and a decrease of about 149,000 compared with April 2016.

The foreclosure presale inventory rate was about 0.85%, a decrease of 3.47% compared with March and a decrease of 27.34% compared with April 2016. That’s a 10-year low.

As of the end of April, there were about 433,000 properties in the pre-foreclosure inventory – a decrease of about 15,000 compared with March and a decrease of about 162,000 compared with April 2016.  There were about 52,800 foreclosure starts during April – a decrease of 12.44% compared with March and a decrease of 10.05% compared with April last year. It was the lowest foreclosure start rate since January 2005.

Prepayments were received on 0.86% of loans during the month – down 10.63% compared with the previous month and down 31.63% compared with a year earlier.

Source: Mortgage Orb

First-Time Homebuyers Deterred by Misconceptions

Posted on May 25, 2017 by Laura Lam

home purchase processThe lack of knowledge around the home purchase process was cited by 39% of mortgage executives as the leading barrier keeping potential first-time buyers from entering the market.  That topped a lack of inventory (29%), excess student loan debt (27%) and rising interest rates (6%), according to a survey taken during the Mortgage Bankers Association’s National Secondary Market Conference by Genworth Mortgage Insurance.

The greatest cause of confusion among first-time homebuyers is the role of a 20% down payment.  Of those surveyed, 28% said consumers still mistakenly believe that a 20% down payment is a requirement for purchasing a home, keeping many first-time buyers from achieving their homeownership goals.  Interestingly, an additional 41% of industry executives surveyed believe that even among prospective borrowers who understand a 20% down payment is not mandatory, the belief persists that it would be difficult to get into a house with less.

According to Rohit Gupta, CEO of Genworth Mortgage Insurance, first-time homebuyers continue to drive the purchase market but many are staying on the sidelines due to these misconceptions.  “There are various low down payment options available today that allow prospective homebuyers to reach their dreams of homeownership sooner,” said Gupta.  “It is crucial that, as an industry, we proactively educate eligible borrowers about solutions that will enable them to buy a home when they’re ready.”

Following are additional findings from this survey:

  • The industry is overwhelmingly aware of the need for improved technological infrastructure for originating mortgages (93%) but they are divided in what is holding the industry back. Outdated mortgage technology platforms requiring extensive overhauls (35%), the lack of a true understanding of the requirements for integration (29%), and the rising associated costs (29%) were seen as the biggest obstacles.
  • Most of the respondents agree that credit quality has improved but sentiment about today’s underwriting standards is divided. Exactly half (50%) of industry executives see today’s mortgage underwriting standards as too high, resulting in quality borrowers being excluded.  And 43% think that today’s current standards are appropriate for the market. Only 7% thought that today’s standards were too low.
Source: Genworth Financial

Household Debt Hits New Record

Posted on May 23, 2017 by Laura Lam

WSJ debt 5-17Household debt is topping its 2008 peak prior to the housing crash. Total household debt has risen to $12.73 trillion in the first quarter, the Federal Reserve Bank of New York reported last week.

However, Americans are handling their debt—mortgages, credit cards, auto loans, and other forms of borrowing – much better, the report shows.  Americans were delinquent on 4.8% of total debt in the first quarter. For comparison, at the end of 2009, 11.9% of consumers were delinquent on their debt by at least 30 days.

The increase in household debt may indicate that more Americans are confident about their jobs and overall economy.  “This record debt level is neither a reason to celebrate nor a cause for alarm,” says Donghoon Lee, research officer at the New York Fed. “Borrowers look quite different today.” He says they tend to be older and have better credit than a decade ago.

Lee does note that auto loan and credit card delinquencies are trending up recently. He also says that student loan delinquency rates “remain stubbornly high.”

Mortgages are making up a smaller percentage of total household debt than they did in 2008, according to the Fed. Mortgage debt accounted for 73% of the total household debt in 2008. Now, it comprises about 68%. Experts point to tougher lending standards as one explanation for the drop.  Auto and student loan debt, meanwhile, have increased their shares at 9.2% and 10.6%, respectively. Credit cards have remained about the same, the Fed reports.

Source:  LA Times/Realtor Mag