Everything You Need To Know About Buying Your First Home
Entries for Mortgage Professional America’s 150 Million Dollar Club report close this Friday, February 26, 2021.
Readers still have time to enter via this online form for the chance to be included in this much sought-after ranking.
Originators must have produced $150 million or more in loan volume in 2020 to qualify. Nominated originators will be required to provide details about his or her production to be eligible.
Entries are open online until Friday.
Source: mpamag.com
US mortgage rates rose for the second consecutive week, hitting a six-month high, according to Freddie Mac.
Freddie Mac chief economist Sam Khater said that this week’s uptick in mortgage rates is a result of growing optimism about the economy’s recovery from the pandemic. The average rates for a 30-year fixed mortgage climbed 16 basis points to 2.97% this week – the highest since August.
Data from Freddie’s Primary Mortgage Market Survey also showed a week-over-week increase in the 15-year fixed-rate loan and the five-year Treasury-indexed hybrid adjustable-rate mortgage, up to 2.34% and 2.99%, respectively.
Rising mortgage rates are already affecting the demand for home financing across the nation. Mortgage applications fell 11.4% this week, according to the Mortgage Bankers Association.
“Optimism continues as the economy slowly regains its footing, thus affecting mortgage rates,” Khater said. “Though rates continue to rise, they remain near historic lows. However, when combined with demand-fueled rising home prices and low inventory, these rising rates limit how competitive a potential homebuyer can be and how much house they are able to purchase.”
Source: mpamag.com
The fix and flip investor had a banner decade. The sheer volume of distressed assets on the market after the financial crisis meant a savvy investor could turn properties around fast and reap huge ROIs. Heck, some of them became reality-show celebrities.
As rates have steadily come down and the housing market has heated up, however, those ROIs have shrunk. Where a fix and flip might have yielded 80% in 2012, it was yielding 40% by 2016 and with the recent boom in the housing market, the numbers are looking tougher and tougher for fix and flip investors.
As the fundamentals of the market shift, many of them are looking to mortgage professionals for answers. They need cashflow and returns, but the margin on a fix and flip isn’t worth it. Luckily, just as the fix and flip market got tighter, the single-family rental (SFR) market has taken off. One lender, RCN Capital, has been working extensively in both the SFR and fix and flip space for years. Justin Parker (pictured) SVP of treasury at RCN, explained exactly how mortgage professionals can guide fix and flip investors into the SFR space to generate cashflow until those fix and flip margins grow back to attractive levels again.
“We have a lot of customers that approach us with deals and fix and flip transaction, and it’s our stance to be a partner to them,” Parker said. “We look at fix and flip deals based on all the resources at our disposal and we ask if this is going to be a profitable deal for them or if they should consider positioning themselves to hold on to this deal and potentially wait a couple of years.”
Read more: The pros and cons of interest-only and ARM loan options
With the flexibility of a lender that can work in both spaces, RCN is capable of taking a borrower who initially approached the property with the intention to fix and flip and switching them over to a loan designed for an SFR property. RCN can refi the property based on rental income as the borrower holds the property for long enough to see house price appreciation drive the value up and ROI with it. It’s a challenge for these borrowers to transition their business model, but RCN’s experience in both spaces can help bridge that gap and drive profitability for the borrower.
Parker stressed that this process can’t be completed without buy-in from brokers and loan officers. Increasingly, Parker has seen ordinary brokers and originators coming to them to learn more about both the fix and flip and SFR markets, to better capture volume from this fast-growing aspect of the more widely struggling commercial mortgage sector.
RCN, Parker explained, treats those brokers and loan officers as key partners in this process. They lean on their own experience to ensure loans are closed quickly and painlessly, while offering their broker partners high-level insights and tailored resources that can help them stand out in these lending spaces.
Read more: How much will the commercial mortgage market grow in 2021?
Helping an investor borrower upend their whole business model invariably comes with challenges, hiccups, and unexpected difficulties. Parker explained that for the borrower and the broker, it’s crucial to have a lender partner that has been around the block and knows the challenges that must be overcome.
“We’ve had a ton of volume over the years that has been able to guide us in the marketplace and give us a huge amount of experience,” Parker said. “The reality is we’ve made our mistakes and we’ve learned from them. As we’ve been around for a while, we have originated a huge number of loans. Working on those loans has allowed RCN to really figure out what works and what doesn’t. Now we can see where things maybe aren’t working and have a tendency to lead to non-performance. We can see, too, the things that are working and what, in today’s market, will lead to good performance and solid returns.”
Source: mpamag.com
Mortgage lending expert John Keratsis, whose experience spans nearly two decades, is joining mortgage platform Deephaven as it extends its footprint in the non-QM market. He will succeed Matt Nichols as president and CEO.
According to a Press release, the transition will enable Nichols – who will also continue to serve as executive board chair of Deephaven – to focus on his position as co-head of Pretium’s residential credit business. Pretium purchased Deephaven Mortgage in 2019.
“I am thrilled to be joining Deephaven during a time of considerable expansion in the non-agency credit space. Pretium’s willingness to invest in intelligent technologies will allow Deephaven to grow and offer creative products to borrowers, which is an exciting opportunity for someone with my experience,” Keratsis said.
Before joining Pretium and Deephaven, Karatsis oversaw a number of Incenter’s mortgage services and specialty lending business divisions as senior managing director. He was also the founder and CEO of Boston National Title, a title and settlement services platform, before it was acquired by Incenter in 2016.
“We are excited to welcome John to the Deephaven team,” said Matt Nichols, founder of Deephaven. “He is a committed entrepreneur with a proven track record of building successful businesses that combine a client-centric operating approach with a commitment to providing world-class service. His depth and breadth of experience and expertise will be instrumental as we continue to scale our platform and look to capitalize on a broad array of strategic business opportunities.”
Source: mpamag.com
Austin, Texas-based mortgage tech startup Fleuid has secured funding to help bolster its digital platform expansion.
Fleuid announced Monday that it had closed a Series A financing round led by Aquiline Technology Growth (ATG) with additional participation from Commerce Ventures. In addition to growing the Flueid platform, the company will also use the capital injection to support business development growth and expand integrations with client and industry partners.
“This funding validates a year of record growth and revenue,” said Flueid CEO Peter Bowman. “We’re delivering key real estate industry differentiators without disrupting workflow for a variety of customers, including new FinTech solution providers who are digitizing the mortgage process. It has been exciting to witness how Flueid’s technology is driving efficiency and measurably reducing risk for all customers while effectively streamlining the management of their pipeline.”
Launched in 2017, Flueid offers a digital platform to enable immediate certainty for title insurability, backed by select underwriters, at the start of the loan lifecycle, enabling customers to take control and streamline their workflow. The software also provides clear informational and action items throughout loan origination, fulfillment, and closing.
“By automating manual processes with technology and data, Flueid is helping transform key segments of the mortgage lifecycle to generate a cost and time-efficient experience. We believe Flueid has the potential to disrupt how mortgages are fulfilled today, and we’re excited to join the team,” said Vivek Krishnamurthy, principal at Commerce Ventures.
Source: mpamag.com
Observers of the housing market could be forgiven for feeling a little bit of whiplash. Since the first major news about community spread of COVID-19 in America around this time last year, we’ve gone through a full economic shutdown, a refinance boom, and what feels like a complete overhaul in the market. A generational change in buyer preference that should have taken a decade happened in a year – and the mortgage industry is left asking if they managed to come through this storm intact and ready for the future.
Fannie Mae’s chief economist Doug Duncan (pictured) offered MPA a look into the year the industry has just experienced. He shared how and why trends in home buying preferences were accelerated by the pandemic and highlighted some others that were directly caused by it. He explained that the story of today’s housing market is being written by millennials. It’s a story, he explained, that has roots in the end of the great financial crisis.
“Looking at the end of the financial crisis when millennials were deciding where to live,” Duncan said, “in the expansion following the crisis, employment picked up first in urban centers. It was the most heavily concentrated urban center employment growth of any recession since the Second World War. Stories about millennials wanting to rent because they saw the damage from foreclosures were completely wrong. They rented because their jobs were in the city centers where they weren’t building single family detached houses.”
Read more: Unintended consequence of Dodd Frank has left a $1 trillion gap in the housing market
Duncan noted survey data conducted by Fannie Mae from 2010 onwards that found around 90% of millennials claimed they want to own a home one day. They were renting in city centers because they first had to secure a job, grow in their careers, and pay down student debt before the move to the suburbs was an option.
While that millennial move to the suburbs has been a major story of the past year, Duncan emphasized that it didn’t begin in 2020. There had been a gradual out-migration of younger people from city centers for two or three years before the pandemic, according to Duncan. As with so much else, the pandemic accelerated an existing trend.
While the virus sped up out-migration, Duncan noted that it could have also derailed or delayed the expected urban return of baby boomers with empty nests in the suburbs. He noted a recent article from the Cleveland Fed which showed that while urban in-migration had generally moved in the same direction as out-migration since 2010, in 2020 in-migrants fell as out-migrants rose. Time will tell whether this trend will continue.
Duncan expects the urban story will be told by amenities and jobs in the future. If the restaurants, theaters and lifestyle appeals of a major city come back diminished after the pandemic, or don’t come back at all, a major pull will be gone. In addition, if jobs no longer require workers to come into the office five days a week, the incentive to live further out may become even stronger.
The rise of remote work could also answer the question many in the housing market have been asking: will the four+ bedroom baby boomer homes sell to millennials who are having far fewer kids? Given that houses are priced for two-income families, Duncan believes we can expect a millennial family to want as many as two office spaces within the home. That need could absorb this large suburban housing stock.
Read more: Why one veteran loan officer isn’t giving up on San Francisco
Underlining all these other desires among millennials is the simple arithmetic of affordability. Not only are homes more affordable outside of city centers, but many businesses are shifting their operations to smaller regional centers where the people they can afford to hire can, in turn, afford to live. The ongoing story in Texas, Duncan noted, is tied to how cheaply properties could be developed in that state for much of the past decade. He cited a telling data point: the price to rent a rental van. Renting a van from Dallas to San Jose is much cheaper than going from the hyper-expensive Silicon Valley hub to the sprawling Texas metro. That rental price, Duncan said, tells you where people have been going.
In the end, that shift in buyer preference and overhaul of the housing market came because of relatively small individual decisions. For so many millennials, the COVID-19 pandemic presented an opportunity to move their lives a few more steps forward. They took it and the market has changed fundamentally as a result.
“The folks we saw moving to the suburbs through our application data were renters buying houses,” Duncan said. “In our system we could see they were buying in a less dense area. Millennials who took jobs at JP Morgan, or something, in 2011 had paid down debt, found partners, and were ready to buy a house in the next few years. COVID-19 hit and they said ‘well, I was going to do it two years from now, but I’m going to do it right now’.”
Source: mpamag.com
An analysis of over three million rental applications by RENTCafé found an interesting trend among Gen Z renters that shows yet another way that this generation is diverging from their millennial predecessors. Where post-college millennials flocked to the nation’s biggest cities in search of jobs, Gen Z renters are increasingly moving to vibrant small towns in states across the American heartland. While residential trends in this generation, born between 1997 and 2012, are still quickly changing, and the chaos of 2020 leaves a number of unanswered questions, the new data presents an interesting insight into where tomorrow’s homeowners are choosing to live now.
The top 20 fastest growing rental markets for Gen Z skewed heavily away from major coastal cities. Most also have fewer than 300,000 residents and generally boast a lower cost of living, with rents below the national average of $1,400. The college town of Greenville, NC topped the list of trending Gen Z cities, with an 84% increase in Gen Z renters since last year. It was followed by Little Rock, AR, North Little Rock AR, and Norfolk VA. Sanziana Bona (pictured), the author of the report, explained just what these trends could mean for the housing market.
“The high cost of renting in big cities, combined with college debt, make it harder for Gen Zs to afford to live in bigger cities,” Bona said. “With these economic factors in mind, more people are looking towards smaller, more affordable markets with a vibrant local scene, where they can not only afford rent, but get a larger space than they would in a big city.”
Read more: Why one veteran LO isn’t giving up on San Francisco
Bona explained that much of this trend is being driven by a longer-term shift among businesses to smaller, more affordable markets and the accelerated rise of remote work, enabling companies based in major metros to hire with less regard for geography. Those recent graduates lucky enough to find work now will most likely be working from home, Bona explained, offering them much more freedom when it comes to choosing where to live.
The key determinants in this picture, Bona said, are the long-term impacts of the COVID-19 pandemic. If working from home remains close to as widespread as it is now, Bona believes we may see this trend of Gen Z living in smaller towns hold true for longer. If that happens, we should expect these small town rentals to turn into small town purchases down the road.
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“If the current trend is to continue and Gen Zs are going to remain in small and mid-sized cities, they can and will contribute to the local economy, which in turn will lead to the revival of such areas,” Bona said. “It’s safe to say that Generation Z is very financially conscious, and they don’t engage in investments they can’t afford. If this trend continues, developers and commercial mortgage professionals from superstar cities will have to shift their attention towards small and mid-sized markets in the heartland to accommodate the demand. But how the ongoing pandemic will affect all this remains to be seen.”
Source: mpamag.com
Between Q3 and Q4, the US economy went through the biggest single drop in real GDP in history, followed by the biggest single rise in real GDP in history. Amid the chaos and confusion of those months, the sheer scale of that economic earthquake has sometimes been lost. While estimates vary, that initial drop equated to as many as 40 million jobs lost due to lockdown orders and the rapid spread of COVID-19. Many of those jobs have been subsequently clawed back but sudden, steep unemployment at a time of national crisis has left millions of Americans with scars on their psyches, and blemishes on their credit reports.
Originators now must work in an economy where credit blemishes are far more common than before. Laid off workers who might have had solid incomes and assets, had to draw down on credit to make it through the roughest early months. Borrowers who would have qualified for agency loans pre-pandemic, even those who have gotten their income back, are being shut out by these blemishes. Originators need to use different tools to secure loans for these borrowers. The solution may lie in non-QM.
“It’s important to understand the premise of non-QM as a broader ‘non-agency’ offering, which typically has met the needs of those borrowers with some credit challenges who still have the ability to repay,” said Tom Hutchens, (pictured), executive VP of production at Angel Oak Mortgage Solutions. “One of the outcomes of COVID-19 is certainly more people are going to have more blemishes, perhaps than ever before. We went from a record low unemployment to record high unemployment in a span of 60 days. Not everybody’s prepared for unemployment that quickly. We believe that non-QM is going to be the solution for those borrowers that were directly impacted by COVID-19.”
Hutchens emphasized that non-QM suits credit-blemished borrowers who are back on their feet and earning good incomes again. These borrowers have the means and ability to repay loans, but circumstance and bad luck in Spring of 2020 has hurt their credit reports such that they don’t fit in the agency box anymore.
While non-QM’s bank statement loans are often a solid solution for self-employed borrowers, Hutchens emphasized the use of other non-QM products for W-2 borrowers who were unemployed for a period of time but have since largely recovered and want to, like so many other Americans right now, move further out of a city.
While non-QM often comes with a higher rate that a borrower may balk at, Hutchens explained these products’ double as “band-aid loans,” a way to paper over the cracks exposed by COVID and get a borrower back on their feet, buying a new property or taking much-needed cash out of their home. A savvy originator can explain how these products can support a borrower as they work to improve their overall credit picture.
Hutchens also emphasized the importance of manual underwriting in the non-QM process as a key security measure for finding the right borrowers. Through manual underwriting, Angel Oak can understand the full story of a borrower, understanding that life takes unexpected turns and allowing for a little bit of human forgiveness in the system.
“We’ve always said that non-QM is common sense lending,” Hutchens said. “It’s not just black and white, we work a lot in the gray areas. We make credit decisions around not just whether we believe this borrower has the documented ability to repay, but do we believe they will repay us. We factor in things like lower loan-to-values, reserves and reasonable debt to income. We put all of that together, and then make that credit decision based on that individual borrower’s situation.”
To attend an informational webinar on non-QM, you can register here.
Source: mpamag.com
Guild Mortgage has hired two new senior loan officers, James Finch and Hannah Cartwright, as part of its expansion efforts in the Midwest.
The mortgage duo came to Guild from First National Bank of Omaha, where they had more than $60 million in combined loan volume at the time of the transition. Finch brings nearly two decades of home financing experience, while Cartwright has been in the industry for seven years. They will be based in Guild’s Overland Park branch and report to district manager Dave Brown.
“Guild’s dedication to its loan officers and commitment to providing first-rate resources and support were very attractive as we evaluated the future of our business,” Finch said. “Our team shares similar values with Guild and its dedication to creating customers for life. By leveraging Guild’s servicing portfolio and proprietary technology platform, we’re positioned to stay connected with our current customers and have the tools to continue to grow and serve more homebuyers across Johnson County.”
“At Guild, we strive to help each customer make the best choice when buying a home. We have the knowledge, experience and loan options to help each individual or family find a loan to fit their needs,” Brown said. “James and Hannah share these commitments and will be great additions to our team as we continue to expand in the Midwest.”
To date, the San Diego-headquartered mortgage company has nearly 4,000 employees operating from more than 200 retail branches in 31 states, including 18 branches in its Midwest Region, which includes Kansas, Missouri and Illinois. Guild Mortgage reported closing $27.8 billion in loan volume for the 12 months ended June 30, 2020.
Source: mpamag.com
As the single-family rental (SFR) market has boomed this year, driven in large part by an exodus of multifamily renters to the suburbs, large and small SFR landlords have been looking for new financing solutions. Whether it’s to expand their portfolio of homes, or take cash out for material updates and upgrades, these landlords are turning to their mortgage brokers for effective financing solutions.
While most lending outfits in the SFR space might specialize in single-property lending, one SFR lender has been specializing in a solution for established SFR landlords: portfolio loans. LendingOne’s portfolio loans allow landlords to refi all their properties with non-recourse loans of up to $30 million. Approvals are based on property cashflow, rather than tax returns. Matthew Neisser (pictured), president and COO of LendingOne, explained why his company has been offering these loans, and how brokers working in the SFR space can use them to 10x their volume while helping their clients win out in the long term.
“This is ideal for clients that have already been successful and own 10 or more rental properties,” Neisser said. “This is a solution for them to be able to do one loan against all those properties. They would typically refinance their money from that loan and go out to continue to buy. The advantage of it is that our rates now are very competitive to banks, starting in the 4% range, but without all the bank underwriting or restrictions.”
Read more: Is single family rental the new multifamily?
The non-recourse aspect of these loans is also attractive and something a bank can’t offer for borrowers because, if something does go wrong, LendingOne won’t be coming after the landlord’s personal assets.
In commenting on how brokers and originators can capture these larger SFR landlords and put them into a portfolio loan, Neisser noted the somewhat amorphous nature of these borrowers. Not as many of them, given the traditionally ‘mom and pop’ nature of the space, would consider themselves SFR borrowers. They’d just call themselves landlords. It’s up to a smart originator and their referral partners to find out who those landlords are and educate them on the range of products available to help them grow.
Now might be the ideal time for these borrowers, Neisser explained, thanks to the ongoing low-rate environment and the entry of big institutional players in the SFR space. Many landlords may see growth as a key to competing against these big players, and a portfolio loan could go a long way in securing growth at a time when house price appreciation is accelerating.
Read more: How much will the commercial mortgage market grow in 2021?
For brokers and originators looking to secure portfolio loans for their clients, Neisser explained why LendingOne can serve as a strong partner. With years of experience securing portfolio loans, it can manage the intricacies of packaging dozens of properties, each with their own financing deals, into a single portfolio loan at a competitive rate.
“We’ve been doing this for a long time,” Neisser said. “We have a dedicated wholesale team to just make sure we’re solving your unique problems. Clearly our payouts are very strong for brokers, but ultimately, we will close and get the deal done. We close thousands of loans a year.”
Source: mpamag.com