Mortgage application volume falls to a four-year low

As per National Mortgage News, Mortgage application activity dropped to its lowest level since December 2014 as interest rates reached an eight-year high, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending Nov. 2 had a 4% decline from one week earlier as the refinance index decreased 3% over the same period. The refinance share of mortgage activity decreased to 39.1% of total applications from 39.4% the previous week.

The seasonally adjusted purchase Index decreased 5% from one week earlier to the lowest level since November 2016, while the unadjusted purchase index decreased 1% compared with the previous week and was 0.2% lower than the same week one year ago.

"Rates increased slightly last week, as various job market indicators showed a bounce back in job gains and an acceleration in wage growth in October," Joel Kan, the MBA's associate vice president of economic and industry forecasts, said in a press release. "The survey's 30-year fixed-rate, at 5.15%, was the highest since April 2010."

"The purchase index declined to its lowest level since November 2016, but remained only slightly below the same week a year ago. It's evident that housing inventory shortages continue to impact prospective homebuyers this fall," Kan said.

Adjustable-rate loan activity increased to 7.8% from 7.6% of total applications, while the share of Federal Housing Administration-guaranteed loans decreased to 10.1% from 10.3% the week prior.

The share of applications for Veterans Affairs-guaranteed loans increased to 10.1% from 9.8% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.7% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased 4 basis points to 5.15%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100), the average contract rate increased 3 basis points to 4.97%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 7 basis points to 5.15%. For 15-year fixed-rate mortgages the average remained unchanged at 4.55%.

The average contract interest rate for 5/1 ARMs increased 3 basis points to 4.36%.

How to know your loan processor is the right one for you ?

A mortgage loan processor is the link between a borrower, loan officer and the  underwriter in the context of a residential mortgage. And he or she is arguably the most important member of the team.

The National Association of Mortgage Processors says, “The primary function of the Loan Processor is to ensure the timely and accurate packaging of all loans originated by loan officers.” So it’s mostly an administrative role.

Mortgage loan processors typically:

• Collect and collate all the information needed to approve a loan and make informed decisions concerning an application
• Input that information into the lender’s IT systems
• Verify information through documents you supply
• Make third-party checks with credit bureaus, employers, accountants and so on
• Order an appraisal of the home
• Obtain title insurance and flood insurance (if needed)
• Ensure the compliance of your case with regulatory requirements and internal policies
• Order the final loan documents
• Ensure the loan stays on track to close on time
• Schedule appointment for closing

You can usually expect a mortgage loan processor to be involved throughout the application process: from pre-approval to closing.


Advantages of a good relationship

For a loan officer, it is of immense help to have a good relationship with a mortgage processor. The processor is the person who often has some workarounds. He/She might suggest an alternative that might get you out of a hole and make the difference between a loan that closes and one that doesn't. For instance, it can be difficult proving that your client is receiving alimony if she doesn’t deposit it separately or keep copies of the checks. And who wants to have to ask their ex for cancelled checks?

A processor may find a way around this, ordering copies of the actual deposits from your bank. So you need him on your side. The last thing you want is to be deliberately unhelpful or gratuitously rude.

In fact, building a good working relationship with her can help you. You want her to see you as a person rather than a case number each time she picks up your file. Even the most objective professionals work harder for those they like. As far as possible, it helps to respond to requests from processors in a timely manner - to show that you care about the work that he/she is doing for you.

Is FHA Home Loan a good option for me?

Is FHA Home Loan a good option for me?

FHA, which stands for the Federal Housing Administration, is a United States government agency which insures home loans for FHA approved lenders.

One of the best tips for buying a house is to fully understand all the financing options that are available to them.  As a buyer is trying to determine which type of mortgage is the best, they must weigh the PROs and CONs of each option.

In this article you’re going to learn what the PROs and CONs of FHA home loans are., a buyer puts themselves in a much better position to make a smart decision when it comes to their home financing.

What Are FHA Home Loans?

FHA has been helping people become homeowners since 1934.  FHA is part of the HUD, which stands for Housing and Urban Development. One of the biggest reasons why FHA home loans are popular nowadays is because they allow buyers who don’t have boatloads of money saved for a down payment to still buy a home.

How To Determine If You Qualify For FHA Home Loans

It’s critical to understand when obtaining financing for a home that there are general guidelines a lender follows, also referred to as mortgage overlays, but there is certainly flexibility depending on a buyers individual circumstances.

Below are some general mortgage overlays that lenders will use to determine a buyers eligibility for an FHA mortgage.  

• Lenders prefer to see a minimum credit score of 620, however, FHA does allow a buyer with a 580 credit score to qualify for a home loan, subject to other requirements.
• FHA home loans require a minimum of a 3.5% down payment.
• Lenders prefer to see a buyer with a debt-to-income ratio of 43% or less.  In some cases, FHA allows a buyer to be manually approved with a debt-to-income ratio as high as 55%.  Buyers with debt-to-income ratios higher than 43% can be approved through the AUS (automated underwriting system).

These guidelines above are very basic.  

Peoples Processing is licenced in multiple states that conducts wholesale and correspondent business. It helps brokers with the loan processing with our experienced team and help them close it faster.

Mortgage application volume rebounds but refis fall to 18-year low

Mortgage applications rose due to year-over-year progress in the job market, snapping a two-week skid. It was a 2.5% increase from the week prior, according to the Mortgage Bankers Association.
The purchase application volume drove the overall numbers. The seasonally adjusted purchase index increased by 7% from one week earlier, however, it decreased by 15% on an unadjusted basis. It stands at 8% higher year-over-year.
Despite the total applications rising, the refinance index decreased 4% for the week ending July 6 from the previous week. That is the lowest level of activity since December 2000. The refinance share of application activity went to 34.8% from 37.2%, the lowest since August 2008.
"The strong job market continues to bolster demand for homes, with purchase volume up 8% year-over-year, even as the lack of inventory still is holding back the pace of sales. Nevertheless, the mix of business continues to move towards loans for home purchase," said MBA Chief Economist Mike Fratantoni.

Employers added 213,000 jobs in June, while the unemployment rate also increased to 4% as more unemployed people resumed looking for jobs. If hiring increases continue, that could translate to more house hunters in the real estate market.
Adjustable-rate loan activity decreased to 6.3% from 6.7% of total applications.
The share of applications for Federal Housing Administration-guaranteed loans decreased to 10% from 10.2%, Veterans Affairs-guaranteed loans jumped to 11.3% from 10.7% and U.S. Department of Agriculture/Rural Development remained unchanged at 0.8%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.76% from 4.79%. The average for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) also dropped, going to 4.68% from 4.71%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.80% from 4.78%. The average for 15-year fixed-rate mortgages dipped to 4.18% from 4.22%.

The average contract interest rate for 5/1 ARMs reached its historical high point of 4.13%, gaining 10 basis points from last week. The MBA began tracking 5/1 ARMs interest rates in January 2011.

VA Program Guidelines Update

The President of the United States signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act. The Act prohibits Ginnie Mae from guaranteeing securities issued on or after May 24, 2018, if such securities are backed by a refinance loan that is guaranteed under the United States Department of Veteran Affairs benefit program and that does not meet the condition provided in the Act. 

To qualify for inclusion in a Ginnie Mae guaranteed MBS, the Act requires VA refinance loans to have a note date that is on or after, the later of:

1. the date that is 210 days after the date on which the first monthly payment is made on the mortgage being refinanced, or

2. the date on which six (6) full monthly payments have been made on the mortgage being refinanced. 

Effective immediately, VA refinance transactions must meet the revised seasoning requirements in order to be eligible for funding/purchase. Plaza's VA Program Guidelines have been updated to align with Ginnie Mae requirements. 

Additionally, for applications taken on or after May 25, 2018 VA IRRRLs must provide a net tangible benefit as described in VA Circular 26-18-13 and all fees and incurred costs referenced in the circular, shall be recouped by the veteran within 36 months after the loan closes. The recoupment calculation is the result of lower monthly payments of the refinanced loan.

Recruiting the Best Requires Commitment

Top originators want companies to keep their promises and to reward good work

Turnover in the mortgage industry is high, which leads to a variety of issues for both the employer and mortgage originators. Whether you are working for a large national or international bank or a small local

 mort-gage company, people and relationships are vital to business success, which means a high turnover rate can be a drag on growth.

If the mortgage industry wants to stem rampant turnover and continue to expand, change must first come at the company level. In this current climate, especially as recruiting efforts are at an all-time high with a strong focus on attracting young originators from the ranks of the millennials, a seismic shift needs to happen to respond to the changing expectations of employees.

The mortgage industry is a behemoth, with U.S. home mortgage debt totaling in excess of $10 trillion. Competition for borrowers and talent alike is fierce, however. Determining what really works when it comes to attracting and retaining top talent, then, is a challenge that must be met, if a mortgage company hopes to compete effectively.

Don’t disappoint

The performance of a mortgage company’s loan originators is often a main determining factor of whether borrowers will come back to the company again and again for their borrowing needs. Consequently, recruiting top originators is a goal everyone in the industry is focused on.

The common recruitment techniques normally involve promising originators big checks, written up-front, with the objective of getting those originators to move their business to the mortgage company doing the recruiting. Along with that big check normally come promises of better back-end service and career-growth opportunities.

Nearly everyone recruiting originators says the same things, and it all sounds fantastic. So, why is there so much turnover? The problem is that even though the same promises are echoed by many companies in the recruiting phase, in a lot of instances, those promises are never kept after a hire is made.

Some originators, for example, move their entire book of business and staff to a new company based on promises of greater marketing assistance and support only to find that they are given the same set of tools every other

mortgage originator has at their disposal, and then they are expected to achieve within that limited framework.

To go from autonomy and a position of respect for being a top producer in one shop to being forced into a system where you became just another number doesn’t feel right and, ultimately, that disappointment leads to more turnover. From existing top performers to lower-producing originators that still show great potential, if mortgage companies hope to attract and retain that talent, it is important for them to understand what creates the ideal work environment for originators.

Create a plan

There must be a better way to attract and retain talented mortgage originators. Part of finding that path involves thinking outside the box at times. Sometimes you need to zag when everyone else zigs. The goal should be to develop a program that ensures everyone wins.

When you achieve that goal, success is the natural outcome. This creative mindset should be applied to creating programs that incentivize originators who aren’t normally satisfied with sim-ply plugging into the daily grind of the status quo.

Create a plan to ensure that your originators’ hard work and enduring commitment to get better and grow the business is properly acknowledged. Why? Because true success comes from not only providing employees what they need today, but also in helping them to plan and secure a better future for themselves and their families.

So, when it comes to recruiting and retention, does your compensation model feel the same as those offered by other regional mortgage companies, national players or big banks? If so, it might be time to think about the pro-cess more organically. An exercise that can be helpful is to think of the perfect company — one in which mortgage originators are happy and want to stay. That involves more than compensation. You also are selling a culture.

Build loyalty

With the right formula in place for recruiting and retaining productive mortgage originators, the company will make more money and its market share will grow, fueled by the goodwill that is generated in workplaces where employees feel valued and recognized.

It’s important to put incentives in place to show that the company’s employees are the No. 1 priority, and not just numbers in a system. In order to operate at maximum productivity, employees must not only feel valued today, but also have the peace of mind to know that their company is commit-ted to them and their careers over the long term — and is willing to reward them over time for their performance.

Think about setting up programs to reward originators who meet mini-mum production standards for annual loan production, for example, or per-haps establish a program that is based on loan quality. Loyalty works both ways, and the results of such reward incentives will be readily apparent in the ongoing commitment demonstrated by originators who feel valued and supported. This paradigm shift will promote the retention of top talent by changing the way your originators look at their careers.

Whatever recruiting and retention pro-gram you set up to attract top originators, the most important factor is that the benefits promised must be delivered, so they are not seen as a carrot dangling in the air, just out of reach. Everyone must win.

Source: http://www.sg-resdigital.com/resdigital/201806re?pg=75#pg75

Non-QM a good catch?

The mortgage industry is seeing a growing demand for non-qualified mortgages. These are typically quality loans that simply fall short of meeting the strict “qualified mortgage” standards set for loans that are purchased and secularized by the government-sponsored enter- prises Fannie Mae and Freddie Mac.

The expanding popularity of non-qualified mortgages is a blessing for many borrowers who have not been able to qualify for a mortgage using traditional financing options. By making such alternative-financing options available to borrowers, mortgage originators have the opportunity to help many qualified borrowers and their families purchase their dream homes.

Many originators are missing opportunities in the home-finance market because they don’t fully grasp a fundamental requirement affecting all non-qualified mortgages — which is ensuring that the borrower has the ability to repay the loan. In the world of non-qualified mortgages, or non-QM, many originators are not clear on the concept of ability to repay and the characteristics that are most important to meeting the requirement.

So, how and when did ability to repay, or ATR, become the standard for the non-QM industry? It started with the Dodd–Frank Wall Street Reform and Consumer Protection Act, which was signed into law by President Barack Obama some eight years ago. The ATR standard embodied in Dodd-Frank requires lenders to make a reasonable, good-faith determination of a consumer’s ability to repay a mortgage that is secured by a dwelling for personal use — a rule that applies to qualified mortgages and non-QM loans alike.

How we got here

All owner-occupied and second-home transactions have to abide by the ATR mandate. Lenders are required to analyze borrowers’ income documentation to determine their ability to repay the mortgage. Again, it’s important to remember that properties owned for business purposes, such as investment properties, are exempt from having to conform to ATR rules and regulations.

The underlying logic of ATR with respect to homeownership is based on ensuring that borrowers are provided loans with payment terms they can afford — meaning they are conservatively calculated based on their income history over the prior 24 months. It is a common mistake for originators to use the loan-to-value ratio (LTV) as a compensating factor when evaluating the viability of a loan. Establishing a conservative LTV is a favorable factor for a lender in the case of payment default, but it is completely irrelevant to the income analysis applied to the borrower’s ability to repay.

ATR can become a particularly thorny area in the case of nonprime loans, which are a subcategory of non-QM products. The distant cousins of these higher-risk loans were called subprime loans, and prior to the housing crash 10 years ago, they commonly were offered to borrowers with a history of delinquent payments or other black marks on their credit. In fact, these so-called sub-prime loans were blamed for helping to spark the housing crisis — given many subprime loans at that time were prone to default because they were poorly underwritten, often relying on little to no documentation.

Many have questioned the rising popularity of nonprime loan programs, arguing that they are just another form of the subprime loans that caused so much havoc in the industry a decade ago. Those assumptions are wrong, however, because the subprime loans of that era would not pass muster under the ATR rules that non-QM loans, including nonprime mortgages, have to meet today.

Attempting to help struggling homeowners refinance their existing failing mortgage, for example, would be virtually impossible under today’s ATR standards. Think about it. How could a lender justify the transaction when the loan that is being used to refinance the failing loan and bail-out the borrower is itself proof of the borrower’s inability to repay the underlying mortgage? In order for a nonprime lender to refinance a mortgage, the borrower must demonstrate the ability to repay by bringing the existing loan current.

Another factor to consider with respect to the opportunities opened up by nonprime loans relates to bank-statement loans. Such loans have become quite attractive for self-employed borrowers who don’t have traditional pay-checks and are unable to qualify for mortgages under the documented-income requirements established by agency guide-lines and banks. Such bank-statement programs are of use for non-QM and nonprime loans because they allow a lender to evaluate the borrower’s bank records to establish income and to determine if there is a history of insufficient-funds notices. Too many notices of insufficient funds on bank statements, for example, point to an inability to repay because they are an indication that the borrower is unable to manage their finances.

A way forward

By applying ATR in new ways, more non-QM opportunities begin to open up. Loan programs offering a five-year fixed rate with fully amortized and indexed payments are one such opportunity, for example. A borrower may get a lower rate with a five-year fixed mortgage, but that rate is not used to determine the borrower’s ability to qualify and the maximum allowed LTV ratio.

Instead, it is common practice for lenders in underwriting the loan to assume a 2 percent increase in the rate or the fully indexed rate, whichever is higher. This more conservative approach enables originators to offer products that might seem risky in name, but actually abide by the concept of ability to repay. Interest-only loans represent another opportunity. Originators typically consider interest-only loans as a way of helping a borrower qualify by making payments lower and more affordable at the initial period of the loan. Of course, for many borrowers, these loans can prove to be the complete opposite of affordable

A 30 -year loan that features a 10-year interest-only option, for example, gives a borrower a low payment for 10 years, but for the remaining 20 years, the borrower is forced to make substantially higher payments. That’s because the borrower has a shorter period of time to pay off the entire loan after the initial 10-year interest-only option expires.

So how do non-QM lenders apply ATR to today’s interest-only loans? Simple, utilize the higher payment that begins in the 11th year of the loan to qualify borrowers and to ensure they can repay the mortgage. Of course, many borrowers today would not be able to qualify for an interest-only program under that approach — compared to the way things used to be done when subprime loans were popular prior to the housing crash.

In response, many lenders have introduced a 40-year amortized loan for interest-only programs, providing borrowers with an additional option to meet their needs. Under a 40-year amortized pro-gram with the interest-only option, the borrower would make payments on the interest for 10 years and then have 30 years remaining to pay off the loan. Compared to a 30-year interest-only loan, the payment in the 11th year would be substantially lower with a 40-year loan.

Naturally, there are many exceptions and factors to consider when determining a borrower’s ability to repay a particular loan. The overall concept, however, still boils down to ensuring responsible lending. It is about providing financing for borrowers who will be able to repay the loans today and down the road.

By applying ATR in new ways to more loan programs, the mortgage industry can expand the non-QM environment, make more financing solutions available for more borrowers and put more people into homes they can afford — which we all want to see happen.

Raymond Eshaghian is the President and Founder of Greenbox Loans Inc

http://www.sg-resdigital.com/resdigital/201806re?pg=56#pg56 (link for this page online)

Trump’s Budget Would Lift Reverse Mortgage Cap, Bring Changes in ’19

As per Reverese Mortgage daily.com , Once again, the Trump administration has proposed a permanent end to the cap on the number of reverse mortgages — while also hinting at additional changes to the Home Equity Conversion Mortgage program for fiscal 2019.

“The Budget will again propose permanently lifting the cap of 275,000 loan guarantees to provide further stability for the HECM program,” the White House wrote in its proposal for the fiscal 2019 Department of Housing and Urban Development budget. “This proposal reflects the significant improvements that have been made to the program to reduce risk to the MMI Fund and to ensure responsible lending to seniors.”

The president and his Office of Management and Budget — led by acting Consumer Financial Protection Bureau director Mick Mulvaney — made the same proposal in its fiscal 2018 blueprint, issued last May.


The full document, titled “Efficient, Effective, Accountable: An American Budget,” is a largely ceremonial document; Congress just last week passed a new two-year budget plan, which the president signed.

Still, the Trump budget plan provides a window into the administration’s priorities and goals, and the HUD section dedicated a significant amount of attention to the HECM.
“The HECM program fills a special niche in the national mortgage market and offers critical opportunities for the nation’s seniors to utilize their own assets and resources to preserve their quality of life,” the document reads.

The Trump administration also heralded recent changes to the program, including the development of Financial Assessment and the new mortgage insurance premium structure, which the White House and HUD said helped to encourage lower draw amounts.
Without mentioning specifics, HUD said that officials are exploring further changes to the program for fiscal 2019.

“The president’s FY19 budget reaffirms this administration’s support of the federally insured reverse mortgage program that has helped more than a million senior homeowners supplement retirement savings and age in place,” National Reverse Mortgage Lenders Association president and CEO Peter Bell told RMD via e-mail. “Language to permanently eliminate the cap on the number of HECM loans that can be insured by FHA is a welcome signal of President Trump’s and HUD Secretary [Ben] Carson’s long-term commitment to sustaining the HECM program.”

Other HUD highlights

Overall, Trump’s preferred plan would see a 1% increase in discretionary HUD funding for a total of $41.1 billion. In addition, the government would have the authority to issue $400 billion in loan guarantees, with $12 billion set aside for HECMs.

The plan would also allow HUD to institute varying regional HECM loan limits depending on the location of the property, as well as pathway for leniency regarding spousal foreclosures.
“This provision gives the Department discretion to make deferrals on HECM loans and provides program flexibility to exempt lenders who would otherwise by required to immediately foreclose upon a living spouse,” the document reads.

To shore up the state of the Federal Housing Administration’s information technology systems, Trump proposed a new IT fee for lenders that would generate up to $20 million for improvements — or the equivalent of about $25 per FHA-backed loan

The FHA’s origination systems experienced 73 outages during 2017, the Trump administration noted, with some of its programs dating back more than 40 years.
“This places the MMI fund at significant risk, and hampers FHA’s ability to effectively partner with the industry,” the administration pointed out.

The White House plan represents a starting point for negotiations with Congress; the New York Times noted that the plan “has little to no chance of being enacted as written.”

December 2017 EHS Over Ten Years

Every month NAR produces existing home sales, median sales prices and inventory figures. The reporting of this data is always based on homes sold the previous month and the data is explained in comparison to the same month a year ago. We also provide a perspective of the market relative to last month, adjusting for seasonal factors, and comment on the potential direction of the housing market.
The data below shows what our current month data looks like in comparison to the last ten December months and how that might compare to the “ten year December average” which is an average of the data from the past ten December months.

• The total number of homes sold in the US for December 2017 is higher than the ten year December average. Regionally, all four regions were above the ten year December average, while the Midwest and South led with stronger sales.

• Comparing December of 2007 to December of 2017 more homes were sold in 2017 in the US and all regions, the West leading with the biggest gain of 22.5 percent. The US had an increase of 20.8 percent while the Midwest had an uptick in sales at 20.3 percent. The South had gains of 21.3 percent. The Northeast region had the slowest pace in sales over the ten year period. Since 2012 existing home sales have gradually increased year over year showing home sales have been stable leading up to 2018.

 

• This December the median home price is higher than the ten year December average median price for the US and all four regions. Price growth has been steady over the last ten years.

• Comparing December of 2017 to December 2007, the median price of a home increased in all regions. The South led all regions with price growth of 27.5 percent followed by the West with 20.3 percent. The US had an incline in price of 19.1 percent while the Midwest experienced a gain of 20.1 percent. The Northeast had the smallest gain of 1.9 percent.

• The median price year over year percentage change shows that home prices were on the decline in 2007 nationally, with the West having the biggest drop of 10.4 percent. Prices dipped by double digits in three of the four regions in 2008 in which the Northeast had the smallest decline of 9.3 percent. The West had the largest drop in prices of 25.8 percent. The trend for median home prices turned around completely in 2012, when all regions showed price gains. The West had the biggest price increase of 20.1 percent and the US showed 11.1 percent gains. The South had an increase of 9.6 percent followed by the Midwest with 9.2 percent. The Northeast had the smallest gain that year of 5.0 percent.

• There are currently fewer homes available for sale in the US this December than the ten year December average.  Inventory figures over the ten year time period has declined substantially having only increased for single family homes and were flat for condos in 2013.

• This current December the US had the fastest pace of homes sold relative to the inventory when months supply was 3.1 months. In 2007, the US had the slowest relative pace when it would have taken 9.6 months to sell the supply of homes on the market at the prevailing sales pace. This was also the case for the condo market which had the biggest challenge in when it would have taken 11.5 months and single-family 9.3 months to sell all available inventory at the prevailing sales pace.

• The ten year December average national months supply is 6.0 while single family is 5.8 and condos are 7.1 months supply.

Mortgage rates jump even higher after positive jobs report

CNBC recently did an article about some of the changes the US economy has seen over the past few months. According to the report, the good news is Americans are making more money – because they're going to need it, especially people thinking about buying a home.

While the just-released January employment report showed job growth that topped expectations, to go along with a nice gain in wages, it also sent bond yields soaring. Mortgage rates loosely follow the yield of the 10-year Treasury. Bond yields have been rising for weeks on strong economic data domestically as well as changes in international monetary policy, but this move was the most dramatic.

The average rate on the 30-year fixed-rate mortgage is at its highest level in four years, about 4.5 percent, and for some lenders, it is even higher.

"This isn't a knee-jerk reaction to some headline event. It's a broad-based, deliberate move," said Matthew Graham, chief operating officer at Mortgage News Daily. "A quick return to December's levels is unlikely, even though we may get some relief on the way higher. How much higher is hard to say, but at a certain point, high rates are self-correcting. We're probably at least half-way to that magic line in the sand."

Boiling the change so far down to a monthly payment, if a borrower took out a $200,000 mortgage in the middle of December, when the average rate was around 3.875 percent, they would have had a monthly payment of $940 (that's not including taxes and insurance). If they were to take out that same loan today, the monthly payment would be $1,013.

While $73 a month may not sound like a lot to some, this is just a best-case scenario. Depending on your creditworthiness, it could be a bigger difference. For some borrowers on the margins, they may no longer even qualify for the loan. Lenders today are required to make sure the borrower has the ability to repay a loan, based on income and other expenses. If the monthly payment is even slightly higher, some borrowers may not make that ability-to-repay standard.

For those out house hunting already, the higher rates will only add to the weakening affordability in the market. Home prices continue to move higher at three times the rate of wage growth. In some large metropolitan markets, annual price gains are in the double digits.

Prices are also growing fastest at the lowest end of the market, where entry-level buyers have even less ability to increase their buying budgets. These buyers are also far more mortgage-dependent than those at the high end.

Of course, mortgage rates are still historically low, looking back over the past few decades. Rates have soared higher than 10 percent in the past, and the market survived.
The difference now is that home prices over the past few years have been able to gain so much because borrowing costs were so low. What's pushing prices higher now, however, is not low rates, but a severe lack of supply. That means higher rates are unlikely to put any chill on the rise in prices. Demand for housing is still strong, but buyers today will have to dig deeper to become homeowners.

Money Magazine says Reverse Mortgage is Good Idea

According to a recent article in Money Magazine, you don’t need fancy financial products to stretch your retirement savings. In fact, most Americans have access to the best retirement income generator around: Social Security, according to a recent report.

Researchers at the Stanford Center on Longevity, in collaboration with the Society of Actuaries, analyzed 292 different retirement income strategies and found that Social Security meets most planning goals. The authors created a retirement income strategy around Social Security, called Spend Safely in Retirement, targeted to middle-income workers with between $100,000 and $1 million in savings who don’t have significant help from a financial advisor.

Spend Safely in Retirement is designed to help wring the most from existing savings, while maximizing the guaranteed income of Social Security, writes Steve Vernon, research scholar at the Stanford Center on Longevity and lead author. Among other benefits, this strategy protects against inflation and the risk of outliving savings while minimizing income taxes and complexity.

In order to maximize Social Security, beneficiaries should delay claiming until age 70, the report says. Financial advisors have long urged clients to wait as long as possible to claim Social Security, since doing so guarantees an annual return of between 6.5% to 8.3% from age 62 to 70, according to Bruce Wolfe, executive director of the BlackRock Retirement Institute. Yet only 4% of those who started taking Social Security in 2016 waited until that age, according to the Social Security Administration.

The report suggests several strategies to bridge the income gap until age 70:

• If possible, continue working, at least enough to cover your basic living expenses, and slash your discretionary spending to live frugally within your means.
• If work isn’t possible, consider using a reverse mortgage line of credit as a pool of funds to help cover living expenses.
• If outside sources of income aren’t adequate, consider building a “retirement transition bucket” with a portion of retirement savings equal to the total amount of Social Security that you’d forgo by waiting until age 70 to claim. Say you retire at 65 and would have received the average monthly benefit of $1,369 if you claimed at that age. Put roughly $95,000 into the transition bucket to cover the amount you would have received in benefits from 65 to 70, indexed for inflation. This pot should be invested in a liquid fund with minimum volatility, such as a money market fund or a short-term bond fund.

Once you reach age 70 ½, the Internal Revenue Service requires you to withdraw a minimum amount from your tax-advantaged 401(k) or IRA each year and pay ordinary income taxes on it. Think of these required minimum distributions (RMDs) as your “retirement bonus,” the report says. Just like the bonus that you might have received on the job, the amount fluctuates—in this case, with your age and the market performance of your retirement account. Your Social Security check, on the other hand, is your “retirement paycheck,” a fixed amount adjusted annually for inflation that covers basic living expenses.

Keep a hefty portion of your RMD accounts in stocks, the report recommends. If you can stomach the volatility, you can go as high as 100% equities, as this provides the most potential upside. Yet if that allocation would keep you up at night, sweating fluctuations in the market, then stick to 50% or 60% in stocks, the authors advise.

In addition to your retirement account, the report recommends that you maintain an emergency fund that wouldn’t be tapped for regular retirement income. Also, if you want to spend more money in your early years of retirement, say to travel, then set those funds aside. For example, if you budget an extra $5,000 for fun for the first five years of retirement, put $25,000 in an account that isn’t used to generate retirement income.

To be sure, this approach won’t make up for inadequate savings, Vernon cautions. And it also won’t protect retirees from catastrophic long-term care expenses, which can quickly drain savings. But other retirement income strategies would also fall short on those counts. Spend Safely in Retirement offers multiple advantages, including a simple design that most retirees can execute on their own.

Peoples Privo Processing is a nationwide processor of reverse mortgages.

Buyers face rising rates heading into spring housing market

As per CNBC the 30 year fix rate is rising steadily since the beginning of this year especially this week .

Price is up to 6.8 % nationally and close to double digit in some local market. The supply  crisis is a big chunk of that biting words are actually the rule now, but a lot of the supporting those prices are also low mortgage rates, so any move higher will hit today's buyers especially first time buyers hard because affordability is more dependent than ever on cheap credit. Also want to remember as these home buyers looking for prices they can afford they going to be looking for lowest rate and as rate rise that means they not only be able to pay less but they will qualify less on mortgage.


Check out the video on  CNBC

How to Educate Financial Advisors About the New Reverse Mortgage

As per Reverse Mortage daily, for the last several years, there has been a major industry-wide push to spread awareness among the financial advisor community about how reverse mortgages can be a powerful tool in retirement planning. But recent changes to the product that lower principal limits and change mortgage premiums have some worried that the HECM has lost its appeal among financial advisors.

While some retirement income experts admit that the new rules do change things, they insist that the HECM still has real value from a financial planning perspective. RMD spoke to several leading experts for tips on how originators can connect with advisors to educate them about the product under the new rules.

Tip No. 1: Move past the stand-by line of credit, but don’t forget it.
Jamie Hopkins, co-director at the American College’s New York Life Center for Retirement Income, says that while the changes take the steam out of the stand-by strategy, it can still be useful in some cases.
“The stand-by line-of-credit option is less attractive, there is no way around that,” he says. “The line of credit will cost more upfront to set up and will grow a bit slower than in the past… Just from talking with advisors, many are less attracted to it now with higher upfront costs.”
But Hopkins says that while its appeal is diminished, the strategy is still valid and shouldn’t be forgotten. “This still remains a very viable and useful strategy, one that is underutilized today.”

Tip No. 2: Stress the use of a HECM to pay off an existing mortgage.
Hopkins suggests originators focus on the benefits of using a reverse mortgage to pay off an existing mortgage. Explain to advisors how a HECM can be a game-changer for clients carrying a mortgage into retirement who have limited resources but want to age in place.
“For anyone considering paying off an existing mortgage with a reverse mortgage, the program just got better,” Hopkins says. “It can help solve the cash-flow issue and can be presented as a more flexible mortgage that allows for monthly payments but does not require them in the event that income or savings gets tight in a given month. This is the strategy that I think will be most widely adopted by financial advisors moving forward as it stresses the importance of cash-flow management in retirement.”

Tip No. 3: Emphasize the HECM for Purchase.
Prominent retirement researcher Wade Pfau is releasing a second edition of his book, “Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement,” that takes into consideration the new rules, and he says one of the topics he’ll be highlighting is the HECM for Purchase.
Pfau says the H4P program benefits from new guidelines, which dictate lower mortgage insurance premiums and a slower growth of the loan balance.
“I provide a case study about the HECM for Purchase and show that it can increase the probabilities for overall retirement success compared with strategies that would [have seniors] pay cash for the home or use a 15-year traditional mortgage to finance the home,” Pfau says. “The reason for this relates to the role of the HECM for Purchase program to reduce exposure to sequence of returns risk in retirement, which is a very important concept for advisors to understand when they are providing guidance to retiring clients.”

Tip No. 4: Curtail price concerns by focusing on how the product has been improved.
While taking out a reverse mortgage can be more expensive than other options in some cases, some experts insist the value is still there. The trouble for originators will be getting advisors to see past the price.
“Strategically combining a HECM opened sooner can help support more efficient retirement outcomes, even if the full retail upfront costs of the reverse mortgage must be paid,” Pfau says. “It is only through this type of education that I hope planners can start to overcome the new sticker shock.”
Shelley Giordano, a member of the Funding Longevity Task Force who has spent years working to promote awareness among financial planners, says it’s important to stress how the product has been improved.
“I think a lot of people have assumed that just because it costs something to set it up, the discretionary client is out the window. But that’s not the case,” Giordano says. “The product is so much better now, but this isn’t something that can be conveyed in a headline or in a TV ad; it requires us to sit in front of a financial advisor and discuss it.”
“Your sales force has to articulate that the changes are positive,” she says. “Yes, there’s a little bit more upfront cost for a whole lot of protection, but less overall cost to the customer. If you can explain that correctly, they will understand it.”

Tip No. 5: Educate, face to face.
Giordano says originators who can develop a solid connection with advisors and take the time to meet them one-on-one will have greater success.
“We have a lot of work in front of us. Lenders that have built real relationships with financial advisors will have a lot less difficultly continuing with their business, because they are able to sit with the financial advisors belly-to-belly and explain what has happened,” she says. “So there is definitely hope. But is it a hard job? Hell yes.”

Hopkins insists that this education is crucial. “Financial planners need to understand the benefits of reverse mortgages, and the recent changes did nothing to change the importance,” he says. “Clients have so much of their wealth tied up in home equity that it just can’t be ignored.”

What are the Major HMDA related changes and When Do They Go into Effect?

A number of things are changing with the new rule that impacts process, workflow, and fields. The amount of data collection required is significantly increasing, above and beyond the original Dodd Frank mandate. The way you report that data is changing as well, with HELOC and Denial Reasons moving from optional submissions to required data elements. There’s also an expanded focus on accurately capturing and reporting borrower ethnicity.

Most significantly, the rule includes revisions as to how depository institutions and non-depository institutions are defined. This change is significant because it determines which financial institutions will have to report HMDA data to their regulators, based on these definitions and specific criteria, like loan volume.

For example, the definition of depository institutions has been expanded to include those that originated at least 25 closed-end loans or at least 100 open-end lines of credit in the previous two calendar years. The definition of non-depository institutions has been revised to include those with a home office or branch in a Metropolitan Statistical Area (MSA) that originated at least 24 closed-end loans or at least 100 open-end lines of credit. The new definition eliminates previous language involving total asset criteria of $10 million and 100 purchase loans, as well as that around volume based originations.

This effectively means that entities that close 2 loans per month are included under the purview of this definition of financial institution. 

Modifications and New requirements include:

• Expanded documentation of loan type to include FHA, VA, RHS, and FSA.
• More detailed information on occupancy, loan amount, and the action taken.
• New fields detailing the credit score(s) and model used to determine lending decision.
• Mandated reporting of up to four reasons for denial of application, beginning in the collection period (that information is optional until January 1 of that year).
• Required reporting for HELOC loans, or any loans providing via an open-end line of credit, which are presently optional until the 2018 collection of data.
• More detailed documentation of borrower ethnicity to ensure everyone is treated fairly, and to monitor compliance with equal credit, fair housing, and home mortgage disclosure laws.

HMDA Data - what it includes

What are HMDA data?

HMDA data cover home purchase and home improvement loans and refinancings, and contain information about loan originations, loan purchases, and denied, incomplete or withdrawn applications. With some exceptions, for each transaction the lender reports data about:

• the loan (or application), such as the type and amount of the loan made (or applied for) and, in limited circumstances, its price;

• the disposition of the application, such as whether it was denied or resulted in an origination of a loan;

• the property to which the loan relates, such as its type (single-family vs. multi-family) and location (including the census tract), and

• the applicant’s ethnicity, race, sex, and income.

In 2003, HMDA data included a total of 42 million reported loans and applications. More information about HMDA data can be found at http://www.ffiec.gov/hmda. 

Data collected on HMDA
The data includes:
•    the mortgage loan number;
•    the date the mortgage application was received;
•    the type and purpose of the mortgage;
•    whether the application resulted in a pre-approval, denial or origination;
•    the property type of the property securing the mortgage;
•    the owner-occupancy status of the real estate securing the mortgage;
•    the mortgage amount;
•    the action taken by the lender on the application;
•    an identification of the MSA and census tract in which the property is located;
•    the ethnicity, race and sex of the mortgage applicant;
•    the gross annual income of the mortgage applicant;
•    the type of investor that will purchase the mortgage;
•    the spread between the annual percentage rate (APR) and the annual prime offer rate; and
•    whether the mortgage is subject to the Home Ownership and Equity Protection Act (HOEPA). 
 

 Additional HMDA data which will be collected in 2018 includes:
•    the borrower or applicant’s age;
•    the borrower or applicant’s credit score;
•    automated underwriting information;
•    a unique loan identifier;
•    property value;
•    the lending channel, e.g., retail or broker;
•    points and fees paid;
•    borrower-paid origination charges;
•    discount points;
•    lender credits;
•    the term of any prepayment period;
•    interest rate;
•    the presence of terms resulting in potential negative amortization; and
•    the mortgage term.