Primary Market/Program Changes - Will Temporary Buydowns Mainstream Again?

By rchrisman@robchrisman.com

 

The world is made up of two kinds of people.  Those who are Irish and those who wish they were."

(When people give you that, "The world is divided into two types of people..." thing, a clever response is, "The world is actually divided into two kinds of people, those who divide the world into two groups of people, and those who don't.")

 

A North Carolina builder knows how to give Millennials want they want. Garman Homes, based out of Cary, NC has created Fresh Paint, a brand catered to Millennials by offering customization options for their home. Home buyers will have the option to choose from free interior design packages, and tailor everything from floor plans to finishes. Homes will range from 1,400 to more than 3,200 square feet and cost between $180,000 to $400,000. Fresh Paint offers an affordable way for new home owners to customize and design their home through a seamless and quick process. Most Millennials want a home that is unique, stylish and meaningful and Fresh Paint offers this in an economic fashion.

What is going on out there in the primary markets?

 Huh? Buydown loans coming back? Sure thing - check this out. Hey, no one ever said they were against the law, right?

 The survey of 317 lenders, conducted by third-party research firm Versta Research, shows how alternative data may be leveraged to better assess risk and price offerings appropriate both for unbanked, unscored consumers and for traditionally prime borrowers. According to its findings, 87% of lenders say they decline some credit applicants because they cannot be scored. Yet 83% of those using alternative data to score credit applicants report seeing tangible benefits. Nearly two in three lenders (64%) say they have seen tangible benefits within the first year of using alternative data. Three in four survey respondents said they expect alternative data will bring about positive economic changes. Other key benefits derived from alternative data, according to survey respondents, include: 66% of lenders using alternative data say it is helping them reach more creditworthy consumers in their current markets.  56% of lenders using alternative data say the data has opened up new markets. 87% of lenders using alternative data do so to evaluate thin-file or no-file consumers. 67% use alternative data to evaluate non-prime borrowers. To access the complete survey, click here.

 Yesterday the MBA reported that the refi index decreased -5.6% and is down -21% since mid-February. Purchases held firm up +0.3% and up +32.8% from 1 year ago.

 But then there was the story about how Mortgage Growth Has Stalled And Homeowners Are To Blame.  Why isn't mortgage debt growing?  Lots of people would like to blame the banks for holding lending standards too tight. The banks often blame the regulators-for making them hold standards too tight.  But it turns out that it may just be the fault of homeowners. They're just paying down their mortgages far more than in the past.  The latest report on household debt from the New York Fed shows that mortgage debt-the largest category of household debt- has been more or less flat since 2012. This is all the more surprising because home prices have been recovering at a brisk pace in recent years.

 So maybe homeowners are not tapping their home equity, at least the way they did before. Home equity loans are about 25% of what they were in 2007. While mortgage lenders are being more conservative, auto loans are now the new credit bubble. When you can get an 8 year car loan for about the same prices as a 30 year fixed rate mortgage, you know this has the potential to end very badly.

 Ever since the bubble burst, homebuilders have largely focused on the luxury end of the market and the move-up buyer. Fun fact: the average size of a new home has increased by 150 square feet since 2008. Entry-level homebuyers had been priced out of the market. Now that is beginning to change, as builders are focusing on starter homes. High land prices remain an issue.

 RealtyTrac came out with its Residential Property Vacancy Analysis for the first quarter of the year, identifying the nation's most vacant cities. Out of the 85 million residential properties in the U.S., 1.6 percent were vacant at the beginning of February. The cities with the highest property vacancy are Flint, Michigan with a property vacancy rate of 7.5 percent and 86 percent of those being investment properties, Detroit, Michigan with a vacancy rate of 5.3 percent and Youngstown, Ohio with a vacancy rate of 4.4 percent with 87 percent of those homes having at least one open loan. Other top vacant cities include Atlantic City, New Jersey with a vacancy rate of 3.7 percent and Beaumont, Texas, which has a vacancy rate of 3.8 percent and experienced a 120 percent increase in vacant foreclosures from a year ago. On the opposite end of the spectrum, the top five cities that have the lowest share of vacant properties include San Jose, California, Fort Collins, Colorado, Manchester, New Hampshire, Provo, Utah and San Francisco, California.

 Lakeview Loan Servicingannounced its FHA Streamline Refinance minimum FICO requirement for all loan amounts has been reduced to 620.

 Mortgage Solutions Financial has temporarily suspended new locks on its 701 Non- Conforming Products.

 Nationstar Mortgage has updated its seller guide. To download the complete update, please click here.

 Bayview Loan Servicing has made enhancements to its portfolio product guidelines when the subject property is owner-occupied. Enhancements include its Early Access Product guidelines to now permit 85% LTV with a 700 minimum FICO score. Its Asset Inclusion Product guidelines will now permit 85% LTV with a 700 minimum FICO score and 80% LTV with a 680 minimum FICO score. Its Alternative Income and Expanded Ratio Products will now permit 85% LTV with a 720 minimum FICO score, 80% LTV with a 700 minimum FICO score and 75% LTV with a 680 minimum FICO score.

 M&T Bank published an alert referring its clients to its matrix for required Re-inspection guidance.

 Effective immediately, LDWholesale has updated the State Specific Disclosure requirements for the state of Colorado.

 Citi posted a reminder regarding undisclosed debt obligations. All Loans submitted for purchase must adhere to the specific Debt to Income (DTI) ratio guidelines set by Citi and the agencies. Changes in DTI prior to close may disqualify a previously eligible Loan.

In some instances, additional debt obligations may not have become effective until AFTER the Loan closing; however, since the debt was initiated PRIOR to Loan consummation, the liability still needs to be considered for Loan qualification.

 A minor update was made to Plaza's 203(k) Program Guidelines to clarify that installing or repairing fences, walkways, and driveways is acceptable on both standard and limited 203(k) transactions.

 Hobby Farm Loan Programs are available at Land Home Financial Services (LHFS). A Hobby Farmer is defined as an individual whose primary source of income is derived from off-farm employment, but whose property has the capability of generating additional agricultural income. Click the link to view details and eligibility requirements.

 If you are looking for a no-income product, Angel Oak Mortgage Solutions is offering no income loans for investment properties. Visit its website for details.

 Land Home Financial Services is offering "no lender fee" on VA products. Click here for details.

 Mountain West Financial has 3 suggestions to help each transaction run smoother. First, lock your loan for 45 days. Back before the LO Comp rules kicked in you could float the rate, hope for higher rebate, and make more money. Now you make the same percentage on every loan so floating rates isn't profitable for you anymore. If your borrower likes the rate you're quoting, lock it for 45 days and then you don't have to worry about charging your borrower for a lock extension should rates start to go up.  Second, submit a clean, complete file upfront. This avoids suspended loans and gets your loans approved faster. Even if it takes an extra day or two to get all the info upfront, it is well worth it in the long run.Third, make sure your borrowers know that they'll be getting emails from MWF for the LE and the CD, and stress to them the importance of acknowledging them immediately.

 AmeriHome's FHA resources have been extensively re-written to include a more comprehensive, step-by-step overview of the FHA insuring process, and the requirements for collecting and remitting Upfront MIP and Annual MIP.  

 Effective with Loans purchased on/after March 21, 2016, Citi is updating its Deficiency Cure policy. Current policy states suspense deficiencies must be cured by the Deficiency Cure Deadline Date, which is the latter of the lock expiration date or 4 business days from suspense notification, to avoid pricing adjustments. This is being expanded to the latter of lock expiration or 6 business days from suspense notification. Also, Citi is changing pricing adjustments applicable when the deficiency cure deadline date are not met. Current lock extension fees remain unchanged. In addition, Citi is offering Community Reinvestment Act (CRA) Premiums on eligible Loans. 

 As of February 8^th, Freedom Mortgage made the following updates to its product guidelines: FHA - Non-Occupying Co-Borrower scenarios, will no longer require the occupying borrowers' housing ratio to be a maximum of 55%. Standard FHA guidelines will now apply. FHA Streamline - Reduction in Term to meet HUDs Net Tangible Benefit. VA Full Document and Credit Qualifying IRRRLs - the maximum DTI will be increased when certain requirements are met. VA IRRRL - Mortgage-Only In-File will no longer require public records to be reported. FMC Agency Products - W-2 transcripts for wage-earners whose sole source of qualifying income is from W-2 income will now be permitted for all Freedom agency products.

 In terms of temporal economic news, we had a gaggle of it yesterday - and rates improved slightly. Housing Starts which rebounded more than expected hitting a 9-year high. Meanwhile February Industrial Production was down .5% - worse than expected. CPI posted gains across almost all sectors except gasoline prices which dropped -13%. The net impact despite positive gains elsewhere was a -0.2% drop last month in inflation. And the Federal Open Market Committee meeting's statement was "dovish." When the dust settled agency MBS prices improved and rates dropped slightly.

 As ThomsonReuters put it, "In her prepared remarks, Fed Chair Yellen seemed to move the goal posts with regards to inflation, downplaying the recent pickup in both survey and market-based readings of inflation expectations, choosing to focus on wage inflation. KC Fed Chair George dissented from the FOMC decision, calling for a 25bp hike, but her pleas fell on deaf ears."

 We wrapped up Wednesday with the 10-year sitting at 1.94% & agency MBS prices having improved about .125. Today brings more central bank meetings including the BOE (at 8:00am), SNB and Norges Bank, as well as the Q4 current account, weekly jobless claims for the week ending March 12 (survey week), the March Philly Fed Manufacturing Survey, and February Leading Economic Indicators.