Mortgage rate increases, along with the additional rate increases expected later this year, are impacting expectations for purchase mortgage demand. According to Fannie Mae’s first quarter 2017 Mortgage Lender Sentiment Survey®, lenders are optimistic about the direction of the economy and home prices, but are showing concern over profit margins compared with previous years.
As many know by now, the Federal Reserve recently raised the Fed Funds rate by 25 basis points. Although this is not directly linked to increasing mortgage rates, many fear this will lead to just that. Higher mortgage rates typically leads to a negative impact on home affordability with fears of it derailing the housing recovery entirely. One person disagrees. Rick Sharga has written a commentary in HousingWire, Why rising Federal Funds rates might be good for the housing market, detailing out his reasons why the increase in the Federal Funds rate may be good for the housing industry.
First, there are two more rate increases expected this year. This may drive many off the fence early in the year and into the housing market before rates increase more, stimulating the economy.
Second, increasing rates forces lenders to loosen lending standards to get more borrowers approved. There are fewer refinances available in this type of rate environment so lenders will try and bring in more purchases. The higher mortgage rates will allow lenders a bit more cushion to take on more risk.
Finally, the 25 basis point increase is much less than the 75 to 100 basis point increase that analysts were expecting. This will most likely cause the rate increase to have a less significant impact on mortgage rates. With these predictions, we could see the strongest spring-selling season in years.
In an article written by Rick Triola and posted on MReport, Endorsing the eMortgage takes a look at why companies have not embraced the eMortgage process. Many have been waiting for the industry to update their out-of-date processes, but there seems to be something holding them back. This article gives a response as to why many of the concerns mentioned by those in the industry are unfounded and only seem to be blocking them from moving into the future of mortgage lending.
Mortgages had the spotlight in the Consumer Financial Protection Bureau's (CFPB) monthly compliant snapshot. Many are experiencing problems with mortgage servicing, escrow accounts, and resolving loan problems.
The Mortgage Bankers Association (MBA) has released a paper, GSE Reform Principles and Guardrails, with their recommendations on Fannie Mae and Freddie Mac (the GSEs) reform. The reform of the GSEs being one of the last items left over from the financial crisis, the MBA has put together a Task Force to determine the best course of action. The Task Force itself was created using MBA member companies of various sizes and models, representing a broad range of real estate entities.
Hours after Donald Trump was sworn in as the 45th President of the United States, HUD released Mortgagee Letter 2017-07 suspending the FHA annual premium reduction indefinitely. All changes have been halted until it can be determined if the premium reduction is warranted. An additional mortgagee letter will be issued if this policy will move forward.
The premium cut would have offered savings of approximately $500 a year for the average borrower. This would have impacted their monthly payment by roughly $42, which could mean the difference between affordable and just out of reach. Additionally, with an increase in mortgage rates expected for 2017, this could have softened the financial blow for low to moderate-income borrowers.
In an announcement made by U.S. Housing and Urban Development Secretary Julian Castro, FHA is reducing its annual mortgage insurance premium (MIP) by 25 basis points. This reduction applies to most new mortgages with closing/disbursement dates on or after January 27, 2017.
The action is in response to the current risk environment. The Mutual Mortgage Insurance Fund (MMIF) has increased in health for four straight years and mortgage rates are increasing forcing mortgage credit costs to go up.
As the end date for the HARP program draws near, it appears the program has done its job. Total refinances stand at 3,418,854, according to the Federal Housing Finance Agency (FHFA). Although these types of refinances continue on their steady decline, they still helped 18,310 borrowers refinance their mortgages through June this year. According to the FHFA, more than 323,000 borrowers still qualify for the program.
In a piece by Bill Smith posted on Housingwire, the effectiveness of the Disclosure Desk is put into question. In the beginning, disclosures were simpler with less data points. They could be automatically assigned and distributed to borrowers without the risk of inaccuracies. In 2010, the Good Faith Estimate and Truth-in-Lending were revamped with more demanding requirements, tolerances, and deadlines. This caused many lenders to ramp up their compliance departments and to create positions dedicated to reviewing documents prior to disclosure. With lenders unwilling to put their faith in their Loan Officer or available technology to ensure accuracy, these costly additions became the norm.
In 2014, the Consumer Financial Protection Bureau released servicing rules that require servicers give troubled borrowers access to servicing personnel, credit payments in a timely manner, and correct any errors on request. Since those rules have been issued, the Bureau has continued to study how they are working in the market. Using that research, updates were proposed to make the rules more effective. After feedback from those effected by the rules, updates have been finalized.