Lenders react to end of Freddie Mac 1% down payment mortgage offerings

Quicken Loans and UWM weigh in

0% down and 1% down mortgage offerings just started to gain traction in the industry when Freddie Mac announced it is changing the requirements and completely nixed its program option.

The government-sponsored enterprise shocked the market this week when it announced it is changing the requirements to its low down mortgage program and will no longer allow lenders to contribute gifts or grants to reach the 3% down payment requirement.

The move shut the door on what was becoming a fast-growing mortgage lending option for first-time borrowers due to its appeal to borrowers who struggle to overcome one of the biggest barriers to homeownership: the down payment.

Fannie Mae and Freddie Mac first introduced 3% down payment options back in 2014, getting the industry comfortable once again with low down options after they disappeared after the financial crisis.

It didn’t take long for some of the nation’s biggest mortgage lenders to jump on board, including Bank of America, Wells Fargo and JPMorgan Chase.

And by 2015, the industry took the idea a step further and started to roll out 1% down and eventually no down mortgages by working with Freddie on its 3% down program, also known as the Home Possible Advantage program.

Quicken Loans led the pack, with a 1% down mortgage that launched in late 2015.

Guaranteed Rate followed suite shortly thereafter and launched a 1% down product of its own in the summer of 2016. Around the same time, United Wholesale Mortgage announced a 1% down payment option. UWM said it would provide eligible homebuyers with a 2% lender-paid down payment that gives consumers a 3% equity at closing.

Each program saw the lenders “granting” 2% of the down payment to the borrower. Add that to the borrower’s 1% contribution, and you have the 3% needed to qualify for the Fannie and Freddie programs.

Then, Fifth Third Mortgage went beyond Quicken, Guaranteed Rate, and other lenders that began originating 1% down mortgages with Freddie, when it rolled out a 0% down mortgage program last year.

Even as recent as this June, Movement Mortgage announced a zero down payment assistance program for first-time homebuyers, saying it would provide grants up to 3% of a home"s sales price, thus creating 97% conventional financing.

Help spur homeownership and give first-time homebuyers an affordable conforming, conventional mortgage option.

And according to an interview with Quicken Loans and United Wholesale Mortgage that is exactly what the programs were doing.

Bill Banfield, the executive vice president of capital markets for Quicken Loans, said in an interview, “From our perspective, when we rolled out the program, it was an instant success.”

Banfield added that Quicken also set up a lot of monitors to make sure the program performed well. In fact, the loans in Quicken’s 1% down program have a delinquency rate of less than one quarter of one percent.

As Banfield explained in a previous interview on Quicken’s 1% down, after Fannie and Freddie changed some of the stipulations to the original 3% down programs they launched, they witnessed a pick up in the borrowers using the low down option.

And while Freddie Mac decided to go in a different direction, Banfield said that Quicken Loans isn’t done innovating. They don’t have anything planned yet to fill the hole but remain excited about the future thanks to their other mortgage offerings, such as Rocket Mortgage, their online digital mortgage.

Banfield emphasized, “The one thing to keep in mind is that this appears like it is something being taken away, but there are other options out there. Whether it’s FHA or other programs, people can still explore their options to see what they qualify for.”

United Wholesale Mortgage CEO Mat Ishbia echoed similar sentiments toward the program going away in an interview, saying, “I think that it’s a great program for consumers, and we are disappointed that Freddie Mac dropped the program.

Ishbia, however, added, “We are proud to still offer it for our brokers despite Freddie pulling out of the program. We want to continue to support consumers.”

UWM saw so much success in the program that they had to double the budget to $20 million this year because of the demand from brokers and homeowners it was helping across America.

When UWM first introduced the 1% down back in July 2016, Ishbia said, “The 1% down program we’re introducing is a new alternative to the 3% down programs that already exist. It’s a conventional loan that is designed for people with a strong credit payment history who want to keep as much money in their wallet as possible when buying a home.”

There is a key difference between UWM’s offerings and the low down offerings other lenders put out. Rather than price some of the savings into the loan, UWM offered the grant and did not require a rate increase for borrowers, but rather increased the FICO score requirement.

This concept, premium pricing, is something Freddie addressed in its new announcement.

The new changes from Freddie stated, “We are revising our requirements to state that gifts or grants from the Seller as the originating lender will be permitted only after a contribution of at least 3% of value is made from Borrower personal funds and/or other eligible sources of funds. Gifts or grants from the Seller must not be funded through the Mortgage transaction, including differential pricing in rate, discount points, or fees for individual loans or across the Home Possible offering.”

Ishbia expanded on this change, saying, “If the loan on a 3% down is at the exact same place and fees as the 1% down, there should be no problem offering them, but my understanding is that’s not how all lenders are doing the program.”

To Ishbia, “If ‘skin in the game’ was the main reason for low down mortgages, they wouldn’t have just taken away the 2% gift from the lenders, they would have taken away all gifts.”

Skin in the game is not the only measurement, he said.

“I think there are great ways to do low down payment programs such as VA loans, which have offered low and zero down mortgages with no mortgage insurance for years,” said Ishbia.

“There is history of these programs doing well. And for those that say it’s a different type of gift, well, if you’re worried about a gift from an interest party, a lender is not an interested,” said Ishbia. “If they don’t charge more in premium pricing, they are not making any more money. Whether it’s 3% down or 1%, borrowers are getting the exact same deal.”

And as Ishbia previously noted, brokers are seeing great success with the program.

But despite demand, Quicken Loans and UWM will both be required to stop offering loans below 3% through Freddie, starting Nov. 1, 2017. Click here to read Freddie Mac"s announcement in full.

BILL BANFIELD, FREDDIE MAC, HOME POSSIBLE ADVANTAGE, HOME POSSIBLE ADVANTAGE PROGRAM, HOME POSSIBLE MORTGAGESMAT ISHBIA, QUICKEN LOANS, UNITED WHOLESALE MORTGAGE, UWM, JVPRO

The post Lenders react to end of Freddie Mac 1% down payment mortgage offerings appeared first on JV PRO.

source http://jvpro.net/lenders-react-end-freddie-mac-1-payment-mortgage-offerings/

Lenders react to end of Freddie Mac 1% down payment mortgage offerings

Quicken Loans and UWM weigh in

0% down and 1% down mortgage offerings just started to gain traction in the industry when Freddie Mac announced it is changing the requirements and completely nixed its program option.

The government-sponsored enterprise shocked the market this week when it announced it is changing the requirements to its low down mortgage program and will no longer allow lenders to contribute gifts or grants to reach the 3% down payment requirement.

The move shut the door on what was becoming a fast-growing mortgage lending option for first-time borrowers due to its appeal to borrowers who struggle to overcome one of the biggest barriers to homeownership: the down payment.

Fannie Mae and Freddie Mac first introduced 3% down payment options back in 2014, getting the industry comfortable once again with low down options after they disappeared after the financial crisis.

It didn’t take long for some of the nation’s biggest mortgage lenders to jump on board, including Bank of America, Wells Fargo and JPMorgan Chase.

And by 2015, the industry took the idea a step further and started to roll out 1% down and eventually no down mortgages by working with Freddie on its 3% down program, also known as the Home Possible Advantage program.

Quicken Loans led the pack, with a 1% down mortgage that launched in late 2015.

Guaranteed Rate followed suite shortly thereafter and launched a 1% down product of its own in the summer of 2016. Around the same time, United Wholesale Mortgage announced a 1% down payment option. UWM said it would provide eligible homebuyers with a 2% lender-paid down payment that gives consumers a 3% equity at closing.

Each program saw the lenders “granting” 2% of the down payment to the borrower. Add that to the borrower’s 1% contribution, and you have the 3% needed to qualify for the Fannie and Freddie programs.

Then, Fifth Third Mortgage went beyond Quicken, Guaranteed Rate, and other lenders that began originating 1% down mortgages with Freddie, when it rolled out a 0% down mortgage program last year.

Even as recent as this June, Movement Mortgage announced a zero down payment assistance program for first-time homebuyers, saying it would provide grants up to 3% of a home"s sales price, thus creating 97% conventional financing.

Help spur homeownership and give first-time homebuyers an affordable conforming, conventional mortgage option.

And according to an interview with Quicken Loans and United Wholesale Mortgage that is exactly what the programs were doing.

Bill Banfield, the executive vice president of capital markets for Quicken Loans, said in an interview, “From our perspective, when we rolled out the program, it was an instant success.”

Banfield added that Quicken also set up a lot of monitors to make sure the program performed well. In fact, the loans in Quicken’s 1% down program have a delinquency rate of less than one quarter of one percent.

As Banfield explained in a previous interview on Quicken’s 1% down, after Fannie and Freddie changed some of the stipulations to the original 3% down programs they launched, they witnessed a pick up in the borrowers using the low down option.

And while Freddie Mac decided to go in a different direction, Banfield said that Quicken Loans isn’t done innovating. They don’t have anything planned yet to fill the hole but remain excited about the future thanks to their other mortgage offerings, such as Rocket Mortgage, their online digital mortgage.

Banfield emphasized, “The one thing to keep in mind is that this appears like it is something being taken away, but there are other options out there. Whether it’s FHA or other programs, people can still explore their options to see what they qualify for.”

United Wholesale Mortgage CEO Mat Ishbia echoed similar sentiments toward the program going away in an interview, saying, “I think that it’s a great program for consumers, and we are disappointed that Freddie Mac dropped the program.

Ishbia, however, added, “We are proud to still offer it for our brokers despite Freddie pulling out of the program. We want to continue to support consumers.”

UWM saw so much success in the program that they had to double the budget to $20 million this year because of the demand from brokers and homeowners it was helping across America.

When UWM first introduced the 1% down back in July 2016, Ishbia said, “The 1% down program we’re introducing is a new alternative to the 3% down programs that already exist. It’s a conventional loan that is designed for people with a strong credit payment history who want to keep as much money in their wallet as possible when buying a home.”

There is a key difference between UWM’s offerings and the low down offerings other lenders put out. Rather than price some of the savings into the loan, UWM offered the grant and did not require a rate increase for borrowers, but rather increased the FICO score requirement.

This concept, premium pricing, is something Freddie addressed in its new announcement.

The new changes from Freddie stated, “We are revising our requirements to state that gifts or grants from the Seller as the originating lender will be permitted only after a contribution of at least 3% of value is made from Borrower personal funds and/or other eligible sources of funds. Gifts or grants from the Seller must not be funded through the Mortgage transaction, including differential pricing in rate, discount points, or fees for individual loans or across the Home Possible offering.”

Ishbia expanded on this change, saying, “If the loan on a 3% down is at the exact same place and fees as the 1% down, there should be no problem offering them, but my understanding is that’s not how all lenders are doing the program.”

To Ishbia, “If ‘skin in the game’ was the main reason for low down mortgages, they wouldn’t have just taken away the 2% gift from the lenders, they would have taken away all gifts.”

Skin in the game is not the only measurement, he said.

“I think there are great ways to do low down payment programs such as VA loans, which have offered low and zero down mortgages with no mortgage insurance for years,” said Ishbia.

“There is history of these programs doing well. And for those that say it’s a different type of gift, well, if you’re worried about a gift from an interest party, a lender is not an interested,” said Ishbia. “If they don’t charge more in premium pricing, they are not making any more money. Whether it’s 3% down or 1%, borrowers are getting the exact same deal.”

And as Ishbia previously noted, brokers are seeing great success with the program.

But despite demand, Quicken Loans and UWM will both be required to stop offering loans below 3% through Freddie, starting Nov. 1, 2017. Click here to read Freddie Mac"s announcement in full.

BILL BANFIELD, FREDDIE MAC, HOME POSSIBLE ADVANTAGE, HOME POSSIBLE ADVANTAGE PROGRAM, HOME POSSIBLE MORTGAGESMAT ISHBIA, QUICKEN LOANS, UNITED WHOLESALE MORTGAGE, UWM, iHelpSell

The post Lenders react to end of Freddie Mac 1% down payment mortgage offerings appeared first on iHelpSell.

source http://ihelpsell.net/lenders-react-end-freddie-mac-1-payment-mortgage-offerings/

The highly contested state of the appraisal market and where it’s headed

HousingWire experts answer the tough questions

Back in March, HousingWire gathered three industry experts to answers readers’ questions on the appraisal market. But as it turned out, one hour wasn’t nearly enough time to properly dig into the state of the highly debated appraisal market.

In the time that has passed since March, however, HousingWire has weighed in on the debate, publishing headlines such as:

• Hey 50-percenters, there is no “appraiser shortage” so knock it off
• Sorry, appraisers, you’re wrong – there is a shortage

Along with headlines on the latest news developments in the appraisal industry, such as:

• FTC forcefully rejects Louisiana’s request to pause regulatory action over appraisals
• Feds take action to solve appraiser shortage

But in order to weigh in on the questions left unanswered on the first webinar, HousingWire hosted a follow-up appraisal webinar.

This time around the webinar features experts Anthony Roveda, director of Valuation Solutions with MasterServ Financial, Jonathan Miller, real estate appraiser and consultant with Miller Samuel and Matt Simmons, commercial and residential appraiser with Maxwell, Hendry & Simmons.

During the webinar, Miller pointed out that the appraisal industry doesn’t have any leadership like it did in the past.

However, the discussion on the state of the industry is finally starting to grow.

Miller stated that he thinks it is an exciting time, and also a stressful time, to be an appraiser. But, he said, things are being shaken up, and the industry is finally debating the issues.

“Yes we are being attacked but that’s because we are being noticed,” he said.

The webinar covered key issues such as:

• Is there an appraiser shortage?
• Will technology take your jobs?
• How fair and reasonable are AMC fees?
• What is being done to encourage new faces to enter the appraisal market?

For an in-depth explanation of the issues, download the webinar for free here.

As a teaser, here’s a look at some of the issues discussed.

Miller commented on the issue of technology replacing appraisers saying, “One of the observations I have made on the industry since 2009 and the roll over into Dodd-Frank is that the appraisal process is being converted from a profession to a widget that fits into a larger system. There is a de-emphasis on actual expertise.”

However, Roveda added that while the possibility exists, the industry still needs an appraiser to do the analysis.

He said technology will not replace technology anytime soon. There are too many variables that go into the process.

Meanwhile, Simmons provided unique data on the number of appraiser in the market, commenting in on the debated “appraiser shortage.”

He stated that as it stands, there is a lack of clarity in the market on the numbers of appraisers in the market.

To help set the record straight on this, Simmons explained that most examples on appraiser supply focuses on dollar volume. However, it paints a better picture when you look at the number of originations.

(Source: Simmons and ATTOM Data Solutions)

At the beginning of the webinar, Simmons further breaks down this chart to show what it means, along with more charts on the annual number of originations per appraiser.

For a free download of the webinar, check here.

ANTHONY ROVEDA, APPRAISALS, APPRAISER, APPRAISER SHORTAGE, JONATHAN MILLER, MAXWELL, HENDRY & SIMMONS, JVPRO

The post The highly contested state of the appraisal market and where it’s headed appeared first on JV PRO.

source http://jvpro.net/highly-contested-state-appraisal-market-headed/

Housing affordability is about to get a lot worse

What happens if interest rate continues increasing

Several reports showed home prices continue to increase as affordability falls, however affordability will plummet even more next year.

The Federal Reserve plans to raise interest rates once more this year, and several times over the next couple of years. Currently, the 30-year fixed-rate mortgage hovers near 4%. A new report from Arch MI gives the scenario if interest rates increase to 5% or 6%.

The report shows the U.S. median existing home price is $246,000. The corresponding $1,200 monthly mortgage payment would require 25% of the median household’s $58,000 a year in pre-tax income.

However, if rates rise to 5%, the median debt-to-income increases 2% to 27% for the U.S. overall. In Texas, median DTI would increase from 21% to 23%, however California’s would increase from 46% to 50%.

If rates increase to 6%, the median DTI would increase to 31% for the U.S., 26% for Texas and 56% for California.

However, the report explains these increases, while drastic, are increasing from the current historical lows. From the report:

While large projected increases seem dramatic after a long period of mortgage rates hovering near historic lows, thankfully median DTIs are currently lower than their historical averages in most areas. For the United States overall, median DTI would just move up to the historical average since 1975. For median DTI to be similar to the “normal” years (1990 to 2004), rates need to be around 5.5%.

While home prices peaked in 2007, total housing costs peaked much before that in the 1980s when interest rates spiked to nearly 18%, the report explains. Housing costs hit a low in 2012 to 2013 as home prices and interest rates fell after the crash.

Since then, affordability worsened as home prices increased faster than incomes. But while interest rates will increase to an estimated 5% by the end of 2018 and 6% by the end of 2019, most economists expect home price growth will also slow to between 2% and 4% once rates begin to rise.

But while home price increases may slow, there is little chance of seeing them fall through 2018. The average probability that home prices will decrease in America’s largest 400 cities remains unusually low at 4%.

The Arch MI Risk Index estimates the probability home prices will be lower in two years, times 100. The higher the Risk Index value, the more likely an area is to experience slower than normal economic and home price growth, and the more likely it is to see outright home price declines.

AFFORDABILITY, ARCH MI, HOME PRICE, INTEREST RATES, RATE HIKE, JVPRO

 

The post Housing affordability is about to get a lot worse appeared first on JV PRO.

source http://jvpro.net/housing-affordability-get-lot-worse/

Newly unsealed documents reveal real reason for Fannie, Freddie profit sweep

Report: Geithner knew in 2011 that GSEs would soon be profitable

In 2012, the government changed the terms of the bailout for Fannie Mae and Freddie Mac, sweeping all the profits from the GSEs to the U.S. Treasury, citing a need to protect taxpayers from the fallout of any future losses from the GSEs. This rationale was repeated by the Justice Department when shareholders sued the government over the sweep.

But recently unsealed documents show that protecting taxpayers was not the real reason the government took this action. In fact, the documents show that Treasury officials knew back in 2011 that Fannie and Freddie would soon become profitable again, according to an article by Gretchen Morgenson for The New York Times.

What’s more, the documents show that high-level Treasury officials involved in the decision to sweep the GSEs’ profits predicted the sweep would generate greater profits than the original terms, which required Fannie and Freddie to pay 10% annually of the bailout assistance they received, the article states.

From the article:

A December 2011 information memo to Timothy F. Geithner, the former Treasury secretary, is among the newly released documents. The 17-page memo from Mary John Miller, assistant secretary for financial markets, shows that the idea to extract all of Fannie’s and Freddie’s profits coincided with their anticipated turnaround.

Ms. Miller outlined “restructuring and transition options” for Fannie and Freddie in the memo, saying the No. 1 option was changing the terms of the bailout to “replace the current 10 percent fixed dividend with a permanent ‘net worth sweep.’” The memo noted that Freddie Mac was “expected to be net income positive by the end of 2012 and Fannie by the end of 2013.”

To view those documents, click here.

Another unsealed document states that this new method “will likely exceed the amount that would have been paid if the 10% was still in effect.”

Source: NYT

FANNIE MAE, FREDDIE MAC, GSES, UNSEALED DOCUMENTS, JVPRO

The post Newly unsealed documents reveal real reason for Fannie, Freddie profit sweep appeared first on JV PRO.

source http://jvpro.net/newly-unsealed-documents-reveal-real-reason-fannie-freddie-profit-sweep/

Why a career in real estate is the perfect fit for many Millennials

Understand social platforms better than any other generation

The world has changed. The technological innovations of the last twenty years have led to the exchange of information with an ease and volume that was virtually unimaginable just a generation ago.

Social media platforms keep us connected with family, friends, colleagues and acquaintances on a daily basis. Economic crises, environmental disasters and the threat of terrorism have shaped our global perspective. All of these factors have led to the world becoming a smaller, more interconnected and interdependent place.

These changes have perhaps had the most impact on society’s youth. Older generations may be slower to adapt to technological advances and many of their opinions have already been formed in a different time under different circumstances. Young adults today have had cell phones and social media accounts since grade school. The threat of terrorism is a post-911 world has always impacted their global perspective. Economic crises have led to changes in workplace attitudes and aspirations. Today’s young adults have different approaches to and expectations of their choice of a commitment to a career.

These changing attitudes have led many young people to explore a career in real estate sales —and in many cases, it seems to be a perfect fit.

Business is conducted online these days as never before. Face-to-face meetings and even lengthy phone calls are often neither desired nor necessary in today’s climate. Information can be gathered, conversations can be conducted and transactions can be completed all while sitting on your couch with a laptop.

This environment is natural to the younger generation.

Millennials are socially-conscious. They want to know that the work they are doing is making a difference and benefitting society in some way. Personal satisfaction in the workplace is often as – or more important- to them than simply making the most money possible. This is a major reason why a career in home sales can be so rewarding. For many families, purchasing their first home is a life-changing, almost spiritual, experience. Investment in a home not only provides a long-term stable environment to raise children, it is also an economic investment in one’s own future. Many fam call it a “dream come true”. Being a part of helping people realize their dreams is the kind of career that many millennials strive for.

A work-life balance is important to many young people entering the workforce today. While in past times, leaving for an office early in the morning and not returning home until evening was seen as a necessary, if not totally desirable, formula for career success; today’s young workers are often unwilling to pursue a career with such requirements. A career in real estate sales allows a person to largely set their own hours, conduct business throughout the day while still leaving time for a mid-day workout, picking up the kids after school, or a late lunch date with a friend. Not being tied to a regular set of hours is not only often a more enjoyable, but a more productive way for many millennials to conduct business.

Many young people also enjoy the feeling of contribution that a career in real estate sales enables. It has been said of the millennial generation that they have a need for constant feedback and in particular, praise. If this statement is accurate, then real estate sales is a perfect career for many in this generation. The feedback is continual and constant, you don’t have to wait years to know if you’re successful, each home purchased or not purchased will tell you how you are doing and each customer that you assist with their purchase will surely let you know how satisfied they are with your efforts.

It seems in many ways, this type of career is one that many young people will find enjoyable, rewarding, and perhaps most important to this generation, meaningful. Millennials are constantly on the lookout for a job that provides more ‘meaning’. What does ‘meaning’ mean, exactly. Meaning in the workplace includes being able to live your desired quality of life as well as make an impact in the lives of others.

By these standards, a career in real estate sales has a tremendous opportunity to provide the meaning in employment that many millennials are searching for. With the housing market being particularly strong in today’s climate, it would seem worthwhile for many young people to explore this opportunity.

MILLENIALS, REAL ESTATE AGENTS, REAL ESTATE CAREER, SOCIAL MEDIA, JVPRO

The post Why a career in real estate is the perfect fit for many Millennials appeared first on JV PRO.

source http://jvpro.net/career-real-estate-perfect-fit-many-millennials/

How 1,000s Of Student Loans Worth Billions Are Getting Erased On A Technicality

National Collegiate Funding (NCF) is an umbrella name for 15 trusts that collectively hold 800,000 private student loans, totaling some $12 billion in outstanding obligations.  The only problem is that roughly $5 billion worth of those loans, or over 40%, are currently in default (and you thought auto delinquencies were bad).

Now, ordinarily when a student defaults on their loan, NCF simply files a lawsuit in local or state court as a means for negotiating a settlement or payment plan with the borrower.  Often times, NCF wins these cases automatically as the borrowers don’t even bother to show up for their court date.  In cases like that, NCF can use their court victory to garnish wages and/or federal benefits from entitlement programs like Social Security which can haunt borrowers for decades (we actually wrote about it here:  Baby Boomers Increasingly Having Social Security Checks Garnished To Cover Student Loan Payments).

That said, NCF is increasingly finding that, much like the subprime mortgage debacle from 10 years ago, student lending institutions apparently had a really hard time keeping tracking of paperwork over the years and/or processed deeply flawed contracts with incomplete ownership records and mass-produced documentation (who can forget that whole robo-signing catastrophe).

As the New York Times points out today, student loans, much like mortgages, are often originated at large commercial banks before being sold to numerous other financial institutions and ultimately ending up in a securitization owned by some unsuspecting European pension funds.  And while pooling these student loans in such a complicated way into securitizations apparently magically eradicates all default risk associated with the underlying loans (just ask any 22 year old on the JPM securitization desk and he/she will confirm the same), it also makes it extremely difficult to prove ownership.

Of course, courts generally shy away from awarding judgements to folks who can’t adequately prove they actually own something.  And, as a result, 1,000s of students are finding they can easily get their student loans expunged on a technicality.

Take the case of Samantha Watson, a 33-year-old graduate of Lehman College in New York who fell behind on her student loans primarily because she “didn’t really understand about things like interest rates.”  Luckily, she doesn’t need to invest the time to learn how to multiply by fractions because, when NCF failed to provide adequate ownership records, some $31,000 worth of her student debt was magically erased.

It almost makes you want to sign up for a masters degree, load up on some student loans and head off to Cancun for spring break…it all seems to be working out really well for millennials (see “31% Of College Students Spend Their Loans On Spring Break“).

 

The post How 1,000s Of Student Loans Worth Billions Are Getting Erased On A Technicality appeared first on JV PRO.

source http://jvpro.net/1000s-student-loans-worth-billions-getting-erased-technicality/

First American: Mounting home sales threaten affordability

Existing home sales outperform market potential

The market’s potential for existing home sales increased in June, and home sales are even outperforming their potential, according to the updated Potential Home Sales model from First American Financial Corp.

The current potential existing-home sales sit at 780,000, an increase of 0.8% or 45,000 sales from last month to a seasonally adjusted annualized rate of 5.59 million. But the market potential for home sales fell 3.8% or 220,000 sales from last year.

“Demand for homes continued to remain strong this month, largely due to continued demand from more Millennials deciding they want to be homeowners,” First American Chief Economist Mark Fleming said. “Yet, the supply of homes for sale continues to decrease.”

“Existing homeowners fear not being able to find something affordable to buy, and a lack of residential construction workers is increasing the cost of building and slowing the pace of new construction,” Fleming said. “The result is a supply and demand imbalance that produces upward pressure on house prices and decreasing affordability.”

While this latest market potential is up 85.8% from the market potential low from December 2008, it is still down 14% from the pre-recession peak of market potential, which occurred in July 2005.

But as it turns out, the market actually outperformed its potential by 0.6% or 31,000 sales in June, First American’s report showed.

“When considering the right time to buy or sell a home, an important factor in the decision should be the market’s overall health, which is largely a function of supply and demand,” Fleming said. “Knowing how close the market is to a healthy level of activity can help consumers determine if it is a good time to buy or sell, and what might happen to the market in the future.”

“That’s difficult to assess when looking at the number of homes sold at a particular point in time without understanding the health of the market at that time,” he said. “Historical context is critically important. Our potential home sales model measures what we believe a healthy market level of home sales should be based on the economic, demographic, and housing market environments.”

EXISTING HOME SALES, FIRST AMERICAN FINANCIAL CORP., HOUSING INVENTORY, MARKET POTENTIAL, JVPRO

The post First American: Mounting home sales threaten affordability appeared first on JV PRO.

source http://jvpro.net/first-american-mounting-home-sales-threaten-affordability/

Fannie Mae DTI increase could add 95,000 borrowers each year

Disproportionate share to go to Latino and black families

As the GSEs seek to ease access to credit and allow more homebuyers into the market, Urban Institute pointed out one change that could allow nearly 100,000 new homebuyers to qualify for a mortgage each year.

Earlier this year, mortgage giant Fannie Mae announced it was raising its debt-to-income ratio to further expand mortgage lending. The GSE raised its limit up to 50%, up from the previous limit of 45%. Even under the only limit, Fannie Mae allowed for flexibility up to 50% DTI for certain case files with strong compensation factors.

However, that flexibility was almost always offered to mortgages with loan-to-value rations lower than 80%. This new increase is significant as increasingly, 3% down payments are becoming the new normal, even on conventional loans.

Urban Institute estimated that 95,000 new loans will be approved each year due to Fannie Mae’s DTI increase, it stated in a report

✎ EditSign

written by Edward Golding, Laurie Goodman and Jun Zhu.

The report also explained a disproportionate share of the new loans will go toward black and Latino families as they are 1.5 times more likely to have DTI ratios above 45%.

The new loans will also be riskier as the probability the mortgage will fall into default increased 31% for those with DTI ratios between 45% and 50% when compared with the median DTI level of 35%.

The increase in the DTI ratio will also allow Fannie Mae to purchase 3.4% more loans. Fannie Mae estimated that between 3% and 4% of recent applications were approved by the AUS and held DTI rations between 45% and 50%, but were ineligible due to additional overlays.

CREDIT ACCESS, DEBT-TO-INCOME RATIO, FANNIE MAE, MORTGAGE ORIGINATION, JVPRO

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Here’s how to understand the basic principles of disruptive mortgage technologies

Let’s get this party started!

In the upcoming session for the California Mortgage Bankers Association “Digital Mortgage Origination for Today,” me and the other panelists will cover the underlying principles of disruptive digital mortgage origination.

This short high-level presentation will cover topics ranging from understanding the basic principles of disruptive technologies and the catalysts that create them’ to ‘defining steps that will help your company keep pace with the changing business environment’.

I highly recommend attending this session for anyone that wants to understand the drivers that are shaping today’s digital origination solutions.

Still not sold on attending? Here’s why, if you work in mortgage tech, you need to go…

Session highlights will include:

Common digital requirements for all ages: Understanding the commonality of service expectations that meet the value propositions of both Baby Boomer and Millennial consumers.

Delivering digital trust and ease of use are key requirements across all demographics. Consumers of all ages require ease of access that mirrors their consumption on other common sites. For a digital conversion to be a success a lender’s site needs to convey trust, clearly demonstrate the terms of the offer, while systemically automating and streamlining the delivery of the consumer’s request for financing

Adding digital strategies to a traditional referral business -How to add services that enhance traditional lines of business and make seamless transitions.

It is essential to have a digital plan that contemplates the company’s existing relationships and the usage requirements of staff. A successful digital conversion provides technology that adds to the company’s capacity by making loan officers and their referral partners more efficient. Being cognoscente of matching the business’ technology needs to the usage requirements of the company’s available human capital is a huge step in avoiding unnecessary expense and implementation failure.

Solving for “PITA” – “Pain In Technical Acquisition”

Today lenders are confronted by a myriad of technological solutions and options.  The selection, or combination of same, is dependent upon the extent to which a lender chooses to delve in digital origination. It is essential, therefor, to look forward, and scope the requirements so as to identify critical processes (must haves) and distinguish those elements from others that are lesser, but desired, features. Having a clear understanding of the end result, APIs, and the connectivity of the platforms one intends to use, are essential to a successful end result.

While this is just the beginning of a very long conversation on the disruptive elements needed in mortgage tech, it is nonetheless a great start to the talk. Hope to see you all there.

CMBA, DIGITAL DISRUPTION, MORTGAGE BROKER, MORTGAGE LENDING, MORTGAGE TEC, JVPRO.NET

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Trump talks Dodd-Frank: We’re going to cut regulations tremendously!

Trump discusses regulatory rollback in wide-ranging New York Times interview

On Wednesday, President Donald Trump sat down with the New York Times for an expansive, wide-ranging interview.

In the interview, Trump stated that he would not have selected Jeff Sessions to serve as attorney general if he knew that Sessions would recuse himself from the investigation into Trump’s alleged ties to Russia.

And while that proclamation seems to be grabbing all the headlines, Trump also discussed a number of other, salient issues, including the administration’s push to roll back the Dodd-Frank Wall Street Reform and Consumer Protection Act and other regulatory reforms.

With much of the focus lately on the Republican Party’s push to repeal and replace Obamacare, Trump hasn’t spoken much about Dodd-Frank lately, but earlier in his term, the subject of rolling back Dodd-Frank came up often.

Back in April, Trump told a group of CEOs that his administration is planning a “very major haircut” on Dodd-Frank. Later in the month, told another gathering of CEOs that a full repeal of Dodd-Frank is a possibility.

Those were the first inclinations that Trump and members of his administration were going to seek regulatory reform. On several other occasions, the Trump administration made it known that Dodd-Frank is a target.

The Trump administration supports the Republican-led Financial CHOICE Act, which would abolish the Dodd-Frank, and the Department of the Treasury recently released a report suggesting significant regulatory reforms, including major changes to the Consumer Financial Protection Bureau and the mortgage lending market.

During the interview with the New York Times (full transcript available here), Trump talked about the regulatory reform efforts already undertaken by his administration and said that more are coming.

When prompted about the state of the financial markets (“The markets are doing great,” New York Times reporter Michael Schmidt said), Trump said that the markets are going to “really go up if we do what we’re doing” in terms of rolling back regulations.

“I mean, cut regulations tremendously,” Trump said, per the published transcript. (Note: All quotes below are taken directly from the Times’ published transcript.)

Trump then digressed into discussing the Times’ coverage of his regulatory rollback efforts, suggesting that the Times did not properly frame the amount of regulations the Trump administration has cut so far.

“Sometimes — you know, one thing they hadn’t thought about at The Times, where they said I didn’t really cut regulations as much. I heard that because I said — it could have been a little slip-up in terms of what I said — I meant, for the time in office, five months and couple of weeks, I think I’ve done more than anyone else. They may have taken it as more than anyone else, period,” Trump said.

“But I’m talking about for my time. I heard that Harry Truman was first, and then we beat him,” Trump added. “These are approved by Congress. These are not just executive orders. On the executive orders, we cut regulations tremendously.”

Trump continued, suggesting that his administration’s regulatory efforts will lead to more homebuilding.

“By the way, I want regulations, but, you know, some of the — you have to get nine different regulations, and you could never do anything,” Trump said. “I’ve given the farmers back their farms. I’ve given the builders back their land to build houses and to build other things.”

Trump then talked specifically about Dodd-Frank, walking back his previous claims about delivering a “major haircut” to Dodd-Frank or repealing the legislation entirely.

Trump also suggested that he wants some rules and regulations, but does not want to “choke” the market with regulations.

“We’re doing well. I mean, the banks, you look at rules and regulations, you look at Dodd-Frank, Dodd-Frank is going to be, you know, modified, and again, I want rules and regulations,” Trump said.

“But you don’t want to choke, right? People can’t get loans to buy a pizza parlor, to buy a — you know, I saw out on the trail — people say, Mr. Trump, we’ve dealt with banks, my own bank, and they can’t loan me anymore,” Trump said. “I’ve never had a bad day with a bank. You know? So we’ll put — yeah, because of statutory [garbled], they can’t loan to that kind of a business. And they’re good businesses to loan to. So I think we’ve — I think we’re set to really go [garbled].”

DODD-FRANK DODD-FRANK ACT DODD-FRANK WALL STREET REFORM ACTDODD–FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT DONALD TRUMP DONALD TRUMP ADMINISTRATION FINANCIAL CHOICE ACTPRESIDENT DONALD TRUMP REGULATION REGULATION AND COMPLIANCE REGULATORY BURDEN REGULATORY ENVIRONMENT REGULATORY REFORMTRUMP ADMINISTRATION, JVPRO.NET

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TransUnion: December rate hike prevented 1 million Americans from paying their mortgage

Significantly lower than estimated 10 million Americans with a mortgage

A new analysis from TransUnion found that 10.6 million Americans could struggle to absorb their increased monthly payments after the Federal Reserve Board raised interest rates in December, however further examination showed only 1 million struggled with being delinquent after the rate hike.

TransUnion’s study identified 63 million consumers who carried debts where the minimum monthly payments was tied to the market interest rate, and would be effected by rate hikes. Using its CreditVision aggregate excess payment algorithm, TransUnion found that 10.6 million consumers were at an elevated risk of not being able to absorb the 0.25% rate hike.

The average change in monthly payments was an increase of $18 after the December rate hike, according to TransUnion. Despite the low amount, it created a challenge for 1 million consumers who were delinquent in their mortgage payment by the end of March.

“When we announced our capacity to absorb a rate increase metric last May we said that it was a conservative measure of risk, in that it did not account for contributions to savings or investments that could be reallocated to cover debt service increases,” said Ezra Becker, TransUnion senior vice president of research and consulting. “We described our metric as an upper bound on the number of consumers who would struggle with a rate increase.”

“We’re pleased to see that only 10% of those consumers we had considered at elevated risk of payment shock from a rate increase exhibited delinquency over the study period,” Becker said. “Most consumers appeared able to reallocate their available cash, or make small changes to their spending habits, to effectively absorb the December rate increase.”

Back in September, TransUnion released a study that showed the rate hike could cause a payment shock for 9 million borrowers.

TransUnion’s control group was made up of 44 million consumers which held no variable-rate credit products, and therefore were not vulnerable to interest rate increases. About 13% of consumers in the control group fell into delinquency by the end of March, a higher delinquency rate than the rest of the test group.

“It was really surprising to us that the control group exhibited greater delinquency rates than those vulnerable to a rate increase in our study,” Becker said. “There are clearly some interesting dynamics at play here that we don’t yet fully understand, but this initial study does seem to indicate that the 0.25% interest rate increase in December did not drive any material delinquency in the immediate term for consumers.”

However, TransUnion cautioned consumers and lenders, saying while this study showed only 1 million consumers were impacted in the first quarter, it did not examine long-term impacts of a rate hike. For example, many consumers could be dipping into their savings accounts to meet the new obligations, and could eventually exhaust that source of funds.

“It is important for both lenders and consumers alike to be cognizant that a rising-rate environment presents a different dynamic than a steady-state or falling-rate environment,” said Heather Battison, TransUnion vice president of consumer communications. “For lenders, a rising-rate environment does present the risk of default due to payment shock.”

“For borrowers, there is now a need to recognize and plan for the fact that rising rates may cause their monthly payment obligations to increase,” Battison said. “The key for both parties is awareness and planning.”

“Above all else, consumers should keep in mind the foundational principles of credit health, which are especially crucial when working to build credit,” he said. “It’s imperative to make the minimum payment due, on time, on all of your bills.”

CREDIT SCORE, FEDERAL RESERVE BOARD, RATE HIKE, TRANSUNION, JVPRO

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Single-family renting: Why rental home communities are on the rise around Phoenix

With the rise in properties in the single-family home rental market, house hunters can enjoy the privacy, space and perks of suburban living without the mortgage.

Jim Belfiore, president of Arizona residential market research firm Belfiore Real Estate Consulting, says there’s a market movement away from apartment renting in light of new rental communities.

Scottsdale-based Colony Starwood Homes announced an acquisition of more than 3,100 single-family rental homes this week, 157 of which are in the Phoenix area.

Belfiore said the acquisition is in line with a trend of companies and developers recognizing the demand for single-family detached rental units.

“People are still renting in heavy volumes and there is a shift from a preference toward renting apartments toward renting single-family detached homes when they’re available,” Belfiore said.

Christopher Todd Communities, an Arizona-based real estate development company announced plans for it’s second luxury, single-family home rental community in May.

The new community, located near 99th Avenue and Lower Buckeye Road in Phoenix will consist of 50 one-bedroom houses and 104 two-bedroom houses, according to a press release.

Belfiore said he thinks communities like these may be the future of the single-family rental market.

“We’re going to start to see a surge here in 2017, 2018 and 2019 based on what’s in the pipeline,” he said.

About 25,000 for-rent units are at various stages in the development pipeline in the Phoenix metropolitan area, Belfiore says.

Though renting is hot, Belfiore says another trend may be emerging: a rise in home purchases.

“People anticipate mortgage interest rates rising in the future and more people have improved their credit since the housing bubble,” he said. “We’re going to see more and more people buying.”

A potential surge in home purchases is the risk of purchasing large rental portfolios, Belfiore said. If this happens, though, Belfiore says single-family rental homes can be sold separately, an option apartment complexes don’t have.

I Buy Houses Fast | I Sell Houses via No Credit Qualifying Owner Financing

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Top zip codes for housing investments

Homeowners aren’t the only ones fighting over the limited housing inventory as many investors are entering the housing market to take advantage of rapidly rising home prices.

A new report from ATTOM Data Solutions shows the median sales price in the first quarter hit $410,684. However, the Neighborhood Housing Index, which measures more than 1,000 U.S. zip codes with an A rating, showed the median sales price in 382 zip codes came in under $250,000, and 27 zip codes held median sales prices under $100,000.

This low-priced housing in quality neighborhoods makes for great returns and lower risk for home flippers and rental investors.

The interactive map below shows where the A-rated neighborhoods are located, and how ATTOM rates its zip codes.

This infographic shows the top neighborhoods for home flipping by comparing the median sales price from the first quarter, the crime rate, average school score, tax rate and the 2016 gross flipping return on investment. The index score is based on a max score of 490.

(Sources: ATTOM Data Solutions)

Using that same information, but substituting the 2017 gross rental yield for 2016 return on investment, ATTOM also found the top five markets with the best rental returns. These index scores are also based on a scale where the maximum is 490.

I Buy Homes Fast | I Sell Houses via No Credit Qualifying Owner Financing | Rent To Own

 

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FHFA wants more input on improving credit access for borrowers with limited English proficiency

Extends deadline to receive input from market

July 18, 2017

 

Ben Lane

In May, the Federal Housing Finance Agency asked the housing market to provide input on how to increase access to credit for borrowers with limited English proficiency.

Originally, the FHFA set a deadline of July 10, 2017 to receive all input, but the FHFA announced Tuesday that it is extending the deadline to get more feedback from the market.

Specifically, the FHFA announced that it is extending the deadline from July 10 to July 31 to “allow more time for interested parties” to provide input on issues facing qualified mortgage borrowers with limited English proficiency.

The move is part of the FHFA’s 2017 Scorecard for Fannie Mae and Freddie Mac, which states that the government-sponsored enterprises are required to identify major obstacles for LEP borrowers in accessing mortgage credit.

The FHFA’s request for input stated that it wanted to learn more about the procedures and tools that originators, servicers, and other parties in the mortgage lending process presently use to assist LEP borrowers.

Now, the market has another two weeks to tell the FHFA what it thinks about lending to LEP borrowers.

FANNIE MAE, FEDERAL HOUSING FINANCE AGENCY, FHFA, FREDDIE MAC, LIMITED ENGLISH PROFIENCY

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MBA: Mortgage applications post slight jump after Fourth of July holiday

Mortgage rates stay quiet

July 19, 2017

 

Brena Swanson

Mortgage applications jumped back up, following the drop during the Fourth of July holiday week.

According to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 14, mortgage applications increased 6.3% from one week earlier.

However, while last week’s applications posted a 7.4% drop, the results included an adjustment for the Fourth of July holiday.

The Refinance Index led the increase in applications, climbing 13% from the previous week. The seasonally adjusted Purchase Index increased 1% from one week earlier.

Additionally, the refinance share of mortgage activity increased to 44.7% of total applications from 42.1% the previous week. The adjustable-rate mortgage share of activity remained frozen at 6.7% of total applications.

The Federal Housing Administration’s share of total applications increased to 10.7% from 10.4% the week prior, as the Veterans Affairs’ share of total applications decreased to 10.7% from 11.5% the week prior.

The Department of Agriculture’s share of total applications remained unchanged at 0.7% from the week prior.

Looking at the various mortgage products, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.22%.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) decreased to 4.18% from 4.19%, while the average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.10% from 4.12%.

Similarly, the average contract interest rate for 15-year fixed-rate mortgages decreased to 3.48% from 3.50%.

The average contract interest rate for 5/1 ARMs remained unchanged at 3.32%.

MBA, MORTGAGE APPLICATION, MORTGAGE BANKERS ASSOCIATION, WEEKLY MORTGAGE APPLICATIONS SURVEY

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Monday Morning Cup of Coffee: Wells Fargo prepares to unveil digital mortgage

Nation’s biggest mortgage lender going digital in 2018

Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on larger issues.

The digital mortgage revolution is about to take a mammoth step forward, as the nation’s largest mortgage lender is preparing to go digital

The revolution towards fully digitizing the mortgage application process really kicked off about 18 months ago when Quicken Loans rolled out its “Rocket Mortgage” in November 2015.

Since then, JPMorgan Chase, Caliber Home Loans, United Wholesale Mortgage, Guild Mortgage, and a number of other lenders unveiled their own version of the digital mortgage.

While each of those companies incrementally moved the industry closer to going fully digital, the digital mortgage shift is about hit lightspeed, as Wells Fargo is developing its own digital mortgage platform.

Actually, Wells Fargo is doing more than preparing to go digital. The bank is already testing its own digital mortgage experience and plans to fully roll it out at some point in 2018.

The bank apparently announced its plans to go digital back in May during its Investor Day presentation, but it went unnoticed.

Hearty kudos to the Charlotte Business Journal for catching Wells Fargo CEO Timothy Sloan discussing the bank’s development of its digital mortgage during the bank’s call late last week with investors conducted in conjunction with the release of its second quarter financial results.

“We’re working on our own online capabilities. And right now, we’re piloting it for our team members, and so far, the response for our team members who are taking a mortgage has been very good,” Sloan said during the call (transcript courtesy of Seeking Alpha).

“In fact, it has been much better than what our expectations were,” Sloan added. “And so our plan is to end to pilot that for non-team member customers later in the year and roll it out next year and we think it will be a step above anybody else in the market.”

During the comments, Sloan referred back to the Investor Day presentation, where the bank revealed much more about its digital mortgage plans.

At the Investor Day event, both Franklin Codel, Wells Fargo’s senior executive vice president of consumer lending, and Michael DeVito, the bank’s executive vice president and head of mortgage production, provided a sizable window into Wells Fargo’s digital mortgage.

During his presentation, Codel said that the “age of the consumer” is creating high expectations for what lenders can offer to their borrowers.

“Speed, simplicity, transparency and a personal experience are setting the baseline experience,” Codel’s presentation stated.

Codel’s presentation also noted that “72% of homebuyers and 80% of Millennials used their mobile device or tablet to search for a home,” while “54% of those who seek pre-approvals do so online.”

Because of those factors and others, Codel said that the bank is “taking action” to better serve its customers.

In that spirit, Codel said the bank is already testing a digital mortgage process.

As Sloan noted, the bank is currently testing its digital mortgage with Wells Fargo employees, and Codel said that the first round of borrowers liked what they saw.

“Customers describe the process as ‘convenient,’ ‘simple,’ ‘quick,’ ‘easy to use,’ ‘straightforward’ and ‘self-explanatory,’” Codel’s presentation stated.

Later in the day, DeVito took the stage to discuss in more detail how Wells Fargo’s digital mortgage works and how it’s different from what other lenders offer.

“Strategically, this is larger than an online mortgage application,” DeVito said. “It is a move to broaden our approach to reaching customers as we transform our mortgage origination business, connect our team, our customers’ data, and technology together.”

A full transcript of DeVito’s presentation is available via YouTube because Wells Fargo actually posted DeVito’s speech, but the link is private and unlisted.

As of HousingWire’s review of the video on July 16, the video had been viewed on 355 times, so it’s not exactly going viral, but you can click here (or check out the embed below) if you want to watch DeVito’s presentation in its entirety.

DeVito said that Wells Fargo believes that combining technology with the bank’s team members will allow Wells Fargo to “deliver an unmatched experience that creates real advantages for Wells Fargo customers and a compelling experience for new customers.”

What sets Wells Fargo’s digital mortgage apart is the fact that especially for current Wells Fargo customers, the process is incredibly easy because Wells Fargo can pull in asset information directly from its own systems.

“This is both fast and secure – no documents to collect or submit,” DeVito said, adding that there are benefits for the bank as well, including “improving the quality of information, reducing risk, and limits our need to touch, image, evaluate paper.”

For customers who have assets with other banks, Wells Fargo’s digital mortgage can pull that data directly as well.

DeVito also demonstrated that Wells Fargo’s digital mortgage can connect directly to payroll providers (like ADP, Paychex, and Intuit) to pull a borrower’s employment data.

Then, once the borrower is done entering their information in, Wells Fargo begins considering their application instantaneously, by pulling a credit report, and running “automated decision tools in the background” to evaluate the customer’s application.

And if the customer provided all the appropriate data and is credit worthy, they could have a pre-approval letter from Wells Fargo in “just a couple of minutes,” DeVito said.

So why is Wells Fargo doing this, beyond the growing consumer demand for a digital experience, as Codel noted?

The bank sees significant opportunities to grow its sizable mortgage business from within its own customer base.

As Codel noted, the bank believes it has a “significant competitive advantage” because there are currently with 40 million Wells Fargo households. And of those 40 million households, only 8 million currently have a mortgage with Wells Fargo, while 18 million have a mortgage with a competitor.

Additionally, 14 million of Wells Fargo’s households are not currently homeowners.

Add that up and Wells Fargo sees the development of its digital mortgage as a “source of significant growth opportunity for both mortgage and home equity.

According to Codel’s presentation, in the current environment, just a 1% increase of Wells Fargo customer share in mortgages equals an additional $6 billion in originations per year.

And each percentage point of growth beyond that is another $6 billion in originations every year.

For reference, Wells Fargo totaled approximately $242 billion in originations in the last 12 months.

So while $6 billion may seem like a relative drop in the bucket for Wells Fargo, consider that Citigroup only originated $19 billion in the last 12 months.

And each percentage point of market share that Wells Fargo grabs is $6 billion in originations that’s being pulled away from the rest of the market into Wells Fargo’s already substantial market share.

Wells Fargo’s digital mortgage ain’t no moon. It’s a space station.

Ben Lane is the Senior Financial Reporter for HousingWire. In this role, he helps set a leading pace for news coverage spanning the issues driving the U.S. housing economy. Previously, he worked for TownSquareBuzz, a hyper-local news service. He is a graduate of University of North Texas. Follow Ben on Twitter at @BenLaneHW.

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Federal judge rules Quicken Loans wrongly influenced home appraisals

Lender loses latest court battle

A judge slapped Quicken Loans with nearly an $11 million penalty after it found the nonbank guilty of allegedly and wrongly influencing home appraisal values during the time leading up to the financial crisis.

But Quicken Loans is quick to fight the ruling, stating it, along with its affiliated company Title Source, will appeal the rulings issued by the Federal District Court in West Virginia in the class-action case of Alig et al. v. Quicken Loans and Title Source.

The case dates back to homeowners in West Virginia who refinanced with Quicken Loans and had an appraisal ordered between Oct. 18, 2004 and April 10, 2009.

According to an article in the Miami Herald by Kenneth Harney:

“Quicken allegedly provided appraisers advance ‘estimates’ of property values in assignments on home financings, effectively communicating the amounts Quicken needed to fund the loan. Plaintiffs in a class action suit affecting 2,770 homeowners said appraisers working for Quicken had overstated the market worth of their properties, putting them underwater on their loans from the start. One home-owning couple said in the original complaint that Quicken’s appraiser had reported their property was worth $151,000, significantly higher than its actual value of $115,500. The court determined that Quicken’s practices constituted ‘unconscionable’ conduct under the West Virginia Consumer Credit and Protection Act.”

“U.S. District Court Judge John Preston Bailey called Quicken’s conduct ‘truly egregious’ in that it ‘flew in the face of prudent lending practices for the benefit of Quicken’s bottom line.’”

Quicken Loans highly contested the claims, telling HousingWire: “This case is the latest example of predatory plaintiff law firms, this time Bordas & Bordas and Bailey & Glasser, manipulating our nation’s legal system by inventing a class of so-called ‘aggrieved’ plaintiffs to enrich themselves financially at the expense of lenders thereby, driving up the costs of financing to homeowners and future homebuyers.”

A Quicken Loans spokesperson stated that it’s irrational to conclude that the customary practice in the 2004 to 2009 timeframe where homeowners willingly provided their estimate of their homes value to the appraiser could somehow result in a judgment against lenders for damages.

Instead, the spokesperson said, “If any party would be aggrieved by appraisers assessing a higher-than-market value to the homes that serve as collateral for loans, it is the lenders who would be damaged by this inadequate collateral.”

The Miami Herald also quoted Dave Stevens, who is the president and CEO of the Mortgage Bankers Association, the largest trade association representing lenders, defended Quicken Loans and argued that “it was a common industry practice during the time these loans were made to provide [an] owner’s estimate of value to appraisers, until the law changed nationwide in 2009.”

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