I
still own a typewriter. But Discover Home Loans conducted a national survey of more than 1,000
recent homebuyers and found that most homebuyers believed they were better
buyers due to technology. The survey discovered that 89% of respondents
used some form of online technology to help them in the home buying process,
76% felt technology made them a more knowledgeable home buyer and 69% said
technology made them more confident. About half of respondents said that using
technology saved them money and 92% said it saved them time. For Realtors out
there, almost three quarters (74%) said it's essential for their real estate
agent to be tech savvy and 42% of buyers working with agents said they did most
of the work to initially find properties. And heck, most of the millennials
haven't even hit the market yet!
“when do you think the industry
will bring back SISA or NINA loans? We sure seem to be headed back to those
days of lower credit and documentation standards, especially as investors have
lots of cash to put to work, lenders fight over fewer loans, and the government
keeps pushing for higher home ownership percentages." Up until recently I
would dismiss talk like that, reminding anyone who would listen that
"those that don't know history are doomed to repeat it." But things
are changing, and the recent rep & warrant changes proposed by the FHFA for
Fannie & Freddie are a gauge.
Out
came an article in the Wall Street Journal
by Joe Light titled "Mortgage Lenders Set to Relax Standards."
What is the public to think with a headline like that? "Some of the
largest U.S. mortgage lenders are preparing to further ease standards for
borrowers after the release of new guidelines this month from mortgage giants
Fannie Mae and Freddie Mac. The new guidelines, to take full effect Dec. 1,
resulted from an agreement in October meant to clarify when lenders would be
penalized for making mistakes on mortgages they sell to Fannie and Freddie.
Lenders have blamed the lack of clarity for tight credit conditions that have
made it difficult for many consumers to qualify for a mortgage. Relaxing the
lending standards potentially could make it possible for hundreds of thousands
of additional consumers to get mortgages...The Urban Institute, a Washington
think tank, earlier this year estimated that as many as 1.2 million additional
home loans would be made annually if mortgage availability were at 'normal'
levels."
What
is normal? Back to alternative documentation? Back to SISA or NINA loans? The
vast majority of originators would not fight offering this product again IF
investors were buying them again, right? Cutting criteria or documentation
certainly lowers the processing time, and the article notes that, "Some
lenders, including Wells Fargo & Co. and SunTrust Banks Inc., said
borrowers should begin to see initial changes in a few weeks, including faster
turnaround times for mortgage applications to be processed. Currently, it can
take two months or longer between the time a consumer makes an application and
the loan is made. Lenders also are expected to widen the scope of the types
of borrowers they will accept by reducing credit-score requirements and giving
greater leeway to consumers whose credit history suffered because of one-time
events, such as a job loss or big medical bill."
Perhaps
it means a reduction in overlays that lenders have put in place in order to
protect them for skirting near, or originating loans, the straight agency
guidelines. "With the new agreement, 'I've been told with absolute
confidence that some lenders are lifting almost all of their overlays,' said
David Stevens, president of the Mortgage Bankers Association. Wells Fargo, the
nation's largest mortgage lender, lifted its credit-score overlay earlier this
year, which the bank said was in anticipation of the agreement with Fannie and
Freddie. Now it says borrowers can expect a smoother process of getting a loan
with less 'excessive' paperwork."
"For
example, under the previous system, (Wells Fargo's) Mr. Heid said a borrower
who had a late payment on an auto loan might have been asked to write a memo
describing what happened, even if such a mistake wasn't critical to the
decision to make a loan or not. That was because Wells couldn't be certain what
would trigger a repurchase demand from Fannie or Freddie, he said. Now, they
are less likely to be required to ask for such documentation, he said, which
should speed the process of securing a loan."
So
what have investors & lenders been doing recently? A quick sampling...
Impac Mortgage Corp. Wholesale spread the word about
its 5th AltQM program in its IMPortfolio Series. "AltQM Asset Qualifier is designed for high net worth borrowers with
significant verifiable liquid assets. Unique features include: the borrower is qualified based on
verified liquid assets, credit scores as low as 680, no income document or DTI
calculation, no 4506-T, only eligible for owner occupied transactions, 5/1,
7/1, 10/1 ARMs, LTVs up to 70%, loan amounts to $2 million (minimum loan amount
is $100,000), and max cash out $500,000."
Fannie
Mae has
released updates to its selling guide to simplify
its condo approval process. Some of the changes include, reducing the pre-sale
requirements for new projects from 70% to 50% and consolidation of Condo
Project Manager and Full Review Process to streamline the approval process.
There is a waver on the 10% investor ownership limit for projects that have
between 5 and 20 units by allowing a single entity to own up to 2 units and 15%
of unit owners may be 60 days past due on common expense assessments.
Wells Fargo Funding
updated its requirements on VA IRRL high balance and non-high balance loans
effective on or after October 27th. In reference to current loan
servicing, regardless of who is servicing the loan, a mortgage payment history
reflecting no mortgage lates (0x30) in the six months preceding the new VA
IRRL's closing date is required. Additionally, regardless of who is servicing
the loan to be paid off, the loan being refinanced must have been seasoned, or
originated, at least six months preceding the new VA IRRL's closing date.
Wells Fargo Funding has
updated its temporary leave and long-term disability requirements on
conventional conforming and non-conforming loans. Additionally, Wells is
reminding clients to comply with the list of counseling agencies requirement
per the homeownership counseling rule on all loans and the FHA elimination of
post-payment interest charges on prepayments effective January 21st, 2015. It also
announced updates to GRH annual fee. Prior to October 14th, GRH annual fee
requirement includes 2 months' worth of monthly annual payments at closing. On
or after October 14th, collection of 1 month worth of annual monthly fee is due
at closing. Wells has also updated its condo eligibility requirements.
M&T Bank
introduced a re-defined Fannie Mae Homestyle product. The streamline
nomenclature has been removed and the $35,000 rehabilitation cutoff has been
eliminated. Also, different criteria have been placed dependent upon whether
the repairs are structural or non-structural.
A while back Flagstar
announced loans underwritten April 15 through October 14, and for which 2013
tax returns and transcripts are not provided, the tax return expiration date is
October 15, 2014. Also, VA IRRRLs interim qualified mortgage rule information
has been updated with new information pertinent to these loans.
Social Security Number verifications
are conducted only if they are a condition of the loan. As a courtesy to its
clients, Plaza Home Mortgage will verify Social Security numbers if
required. As such, the link for SSN Verification has been removed from the
website, effective October 20, 2014. As of October 15, 2014, all 2013 Personal
Tax returns must be filed with the IRS. 2013 IRS tax return extensions are no
longer valid. Plaza will now use the 4506T on file to request transcripts of
2013 personal returns. Plaza is now offering Co-op financing in select areas of
New York and New Jersey, effective October 21, 2014.
Turning to interest rates, an
expanding economy, as indicated by strong GDP, low unemployment and increasing
wage growth, and continued housing appreciation usually leads to higher rates.
In theory, borrowers are doing well and more of them qualify to buy houses,
right? We are indeed seeing decent employment and housing numbers, and last
week, according to the latest BEA revisions, the U.S. economy grew at a 3.9
percent annualized rate in the third quarter. This was faster than the initial
estimate, mostly due to a faster pace of domestic spending - both business and
consumer. Wells Fargo's economists point out that, "The revised look at
GDP may offer a brighter assessment of third quarter growth, but the stronger
domestic spending and inventory investment figures may set us up for a
difficult fourth quarter." Stay tuned!
But we're all back to a full
work week, and several more business days this month than in November. And
suffice it to say we have a lot of scheduled news this week, starting with some
Institute of Supply Management numbers today and tomorrow. Tomorrow we'll also
have Construction Spending. Wednesday is the ADP Employment Change (which does
not include government hiring & firing, Nonfarm Productivity, Unit Labor
Costs, and the Fed's Beige Book. Thursday has weekly Jobless Claims. Friday
things wrap up with the media favorite: the Unemployment Rate, Hourly Earnings,
and Nonfarm Payroll. Friday we'll also have some trade balance figures which
will be lost in the shuffle. We closed last week with the 10-year yield at
2.19% and this morning we're at 2.17% with agency MBS prices better a smidge.
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