MBA's Guidance on 2017 Volumes, Conventional Conforming Changes Roll On

By rchrisman@robchrisman.com

THE FOUR STAGES OF LIFE:

1) You believe in Santa Claus.

2) You don't believe in Santa Claus.

3) You are Santa Claus.

4) You look like Santa Claus.

It is probably not the case that this date is celebrated by mortgage bankers from coast to coast, and forget the jokes about it being the "Mortgage Drinkers Association." But on this date in 1933, the 21st Amendment to the Constitution was passed and ratified, ending national Prohibition. Just think about what conferences would be like if alcohol was still banned. It would certainly save a lot of money for the MI companies that always seem to sponsor the parties! Decades from now will "edibles" be in vogue?

Let's take a look at a pre-election estimate. The Mortgage Bankers Association announced earlier this year that it expected to see $1.10 trillion in purchase mortgage originations during 2017, an 11 percent increase from 2016. In contrast, MBA anticipates refinance originations will decrease by 40 percent, resulting in refinance mortgage originations of $529 billion. In total, prior to the election and rates shooting up the MBA thought mortgage originations will decrease to $1.63 trillion in 2017 from $1.89 trillion in 2016. For 2018, MBA had forecast purchase originations of $1.18 trillion and refinance originations of $410 billion for a total of $1.59 trillion.

It all made sense, pre-election. Strong household formation coupled with further job growth, rising wages, and continuing home price appreciation will drive strong growth in purchase originations in the coming years. It still does. And after the HMDA data came out the MBA upwardly revised its estimate of originations for 2015 to $1.68 trillion from $1.63 trillion, to reflect the most recent data reported in the 2015 Home Mortgage Disclosure Act (HMDA) data release.

Let's take a look at the MBA's current estimates, since plenty of lenders use those as a benchmark - although lenders never think declining volumes will impact them - it is always "the other guy" who is going to be hit. Keep in mind that 2003 was the high water mark for residential originations: $3.8 trillion. 2015 clocked in with $1.67 trillion, 2016 is shaping up to be $1.89 trillion, and the MBA predicts 2017 to be $1.58 trillion - down about 16%.

Purchase biz in 2015 was $903 billion, 2016 estimated at $990 billion, and forecast at $1.1 trillion in 2017. On the refi category, 2015 was $776 billion, 2016 expected at $901 billion and then 2017 forecast at $484 billion - a drop of 46%.

 What are people financing, or refinancing? Attom Data Solutions reports the value of the housing market has reached $26 trillion, supported by $14 trillion in mortgage debt ($10 trillion is single family residences). In order, the largest lenders as of Q2 2016 are: Wells Fargo (26,262 originations in the quarter), Quicken (18,753), Caliber (13,580), Bank of America (11,111), Fairway Independent (11,020), JPMorgan (9,862), Movement (9,796), Prime Lending (9,064), Guaranteed Rate (8,581), and Guild (8,315). Of note, 63% of the total was originated by nonbank originators.

The lion's share of loans are still destined for the agencies, and let's see what is happening to lenders & investors in their conventional conforming lineups.

 Join the webinar courtesy of Ellie Mae and representatives from Fannie Mae and Freddie Mac on December 7^th to gain vital intel into upcoming Uniform Closing Dataset (UCD) closing disclosure changes.

This year, Fannie Mae and Freddie Mac published a redesigned Uniform Residential Loan Application (URLA) along with a corresponding Uniform Loan Application Dataset (ULAD). These documents support changes in mortgage industry credit, underwriting, eligibility policies, and regulatory requirements. A new self-paced presentation can now to help you understand the changes to the URLA (i.e., Fannie Mae Form 1003), summarizing the differences between the new and old forms, what you should be doing now to get started, a high-level timeline, and more. Reference additional resources including the interactive/dynamic forms and ULAD mapping on the URLA page.

Freddie Mac released a series of disclosure specifications relating to the upcoming single agency security (UMBS). From the release: As a reminder, Freddie Mac will implement the Single Security aligned disclosure format for our current single class PC securities in the Summer of 2017. Vendors should begin to review the specification, sample files and the updated 2017 Disclosure Guide and make plans to update their systems in the first half of 2017. In the first quarter of 2017 Freddie will provide system-generated L1/L2 test files for the early Freddie Mac implementation.

Rates? The Trump victory initially sent interest rates on a dizzying ride in the days following the election. They plunged for a few hours, then roared upward. They've certainly moved higher since. Markets never like uncertainty, and the market had a Clinton win baked into its forecasts. The benchmark 30-year fixed-rate mortgage rose election week to 3.73 percent from 3.69 percent, according to Bankrate's weekly survey of large lenders. A year ago, it was 4.11 percent. Four weeks prior the rate was 3.62 percent. The last time the 30-year fixed was higher was June 8, at 3.74 percent. Over the past 52 weeks, the 30-year fixed has averaged 3.78 percent.

 Anyone who claims that the economy in the United States is not doing better than it was a few years ago is wrong. And an improving economy often leads to higher rates as the demand for capital to expand increases. We received more evidence of a solid economy at the end of last week with the employment data. Average hourly earnings growth in the U.S. fell short of expectations for November but the rest of it was solid, and yet MBS prices improved Friday, along with Treasuries:  the 10-year rallied .5 to close yielding 2.39% and MBSs improved about .250.