Refinances Remain Steady With Slight Uptick In Interest Rates

The percentage of refinances remained steady at 35 percent of total loans, despite a slight uptick in interest rates according to the August Origination Insight Report from Ellie Mae. Additionally, overall closing rates climbed to 71.7 percent, the highest since January of 2017 and up from 70.6 percent in July.

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“As the summer season drew to a close, refinances held steady at 35 percent of all closed loans coupled with a slight increase in interest rates to 4.27, up from the 2017 low of 4.25 in July,” said Jonathan Corr, president and CEO of Ellie Mae.

Other statistics of note in August included:

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>>The percentage breakdown of all closed loans remained steady for the third consecutive month with conventional loans representing 64 percent of all closed loans, FHA loans representing 22 percent of all closed loans, and VA loans representing 10 percent of all closed loans.

>>While the average FICO score on all closed loans remained steady at 724 in August, average FICO scores for FHA refinances increased three points to 649. The average FICO score for conventional purchase loans decreased to 752 in August and FICO scores for VA refinances increased two points to 702, up from 700 in July.

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>>Closing time for all loans fell to 42 days in August. Time to close a refinance decreased to 41 days, down from 42 days the month prior. Time to close a purchase loan remained at 43 days in August.

The Origination Insight Report mines data from a robust sampling of approximately 80 percent of all mortgage applications that were initiated on the Encompass all-in-one mortgage management solution.

In addition to the Origination Insight Report, Ellie Mae also distributes data from its monthly Ellie Mae Millennial Tracker on the first Wednesday of each month. The Ellie Mae Millennial Tracker focuses on mortgage applications submitted by borrowers born between the years 1980 and 1999.

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Co-Borrowers Account For 23% Of Single Family Loans

ATTOM Data Solutions found that more than 2 million (2,033,296) loans were originated on U.S. residential properties (1 to 4 units) in the second quarter of 2017, up 27 percent from a three-year low in the previous quarter but still down 12 percent from Q2 2016.

The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by ATTOM Data Solutions in more than 1,700 counties accounting for more than 87 percent of the U.S. population. Counts and dollar volumes for the most recent quarter are projected based on available data at the time of the report (see full methodology below).

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The report also found that 22.8 percent of all purchase loan originations on single family homes in Q2 2017 involved co-borrowers — multiple, non-married borrowers listed on the mortgage or deed of trust — up from 21.3 percent in the previous quarter and up from 20.5 percent in Q2 2016.

“Homebuyers are increasingly relying on co-borrowers to help with home purchases, particularly in high-priced markets where sizable down payments are necessary to compete,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “This rising trend in co-borrowing is helping to eke out increases in purchase loan originations despite affordability and supply constraints.”

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Highest share of co-borrowers in San Jose, Seattle, Southern California and Portland

Among 42 cities with at least 1,500 purchase loan originations on single family homes in the second quarter, those with the highest share of co-borrowers were San Jose, California (50.9 percent); Miami, Florida (45.2 percent); Seattle, Washington (39.1 percent); the Southern California cities of Los Angeles (31.1 percent) and San Diego (29.4 percent); and Portland, Oregon (28.8 percent).

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“Climbing home prices are forcing more and more borrowers to consider other options, such as leveraging a parent’s credit, in order to qualify to buy,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “Given the ongoing concerns about the emergence of another housing bubble, it was encouraging to see that Seattle has the tenth highest average down payment in the U.S. at 14 percent. Such substantial down payments can act as a cushion in the unlikely event that home prices start to reverse the substantial gains that we’ve seen over the past several years.”

Cities with the lowest share of co-borrowers in the second quarter were Memphis, Tennessee (10.3 percent); Mesa, Arizona (12.5 percent); Oklahoma City, Oklahoma (14.2 percent); Gilbert, Arizona (14.4 percent); and Henderson, Nevada (15.1 percent).

WebMax Enhances Loan Origination And Borrower Experience With Optimal Blue

WebMax has chosen Optimal Blue as their partner to provide a unique digital mortgage experience with lender-specific, real-time, compliant pricing, rates and product eligibility through the Optimal Blue API.

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This integration will allow WebMax to provide accurate, instantaneous data at the time of application submission, further enhancing and providing a better path to completion, as well as increased efficiencies for the lender and enhancing customer satisfaction.

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“WebMax is thrilled to work with Optimal Blue to increase the seamlessness of the borrowing experience,” said Curt Tegeler, President and CEO of WebMax. “Current and future clients can now benefit from the enhancement of the borrowing life cycle through this integration. Through our website solution, pricing and rates are provided to the borrower immediately upon submission of our digital application.”

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Optimal Blue’s eCommerce platform consumes product and pricing content from the industry’s largest network of investors, provides intelligent selection and customization of that content as desired by lenders, and distributes the personalized results to leading technology providers via RESTful APIs – wherever, whenever it matters most.

“This is an exciting partnership for Optimal Blue and WebMax,” said Chazz Huston, Strategic Alliances Manager for Optimal Blue. “It benefits everyone in the loan lifecycle. Borrowers and lenders are seeking a simplified, accurate and streamlined mortgage experience, and this integration does just that.”

Originations Are Down 8%

RealtyTrac released its Q1 2016 U.S. Residential Property Loan Origination Report, which shows 1.4 million (1,415,511) loans were originated on U.S. residential properties (1 to 4 units) in the first quarter of 2016, down 12 percent from the previous quarter and down 8 percent from a year ago to the lowest level since the first quarter of 2014.

The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by RealtyTrac in more than 950 counties accounting for more than 80 percent of the U.S. population.

The year-over-year decrease in total originations was driven by a 20 percent year-over-year decrease in refinance originations even while purchase originations increased 3 percent from a year ago and Home Equity Line of Credit (HELOC) originations increased 10 percent from a year ago.

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“After a surprisingly strong 2015, the mortgage refi market started running out of steam in the first quarter of 2016 despite lower mortgage interest rates,” said Daren Blomquist, senior vice president at RealtyTrac. “Meanwhile the purchase loan market continued the pattern of slow-and-steady growth that it has been following the past two years, and HELOC originations increased on a year-over-year basis for the 16th consecutive quarter, showing that borrowers are regaining both home value and the confidence needed to increasingly leverage their home equity.”

Dallas, Louisville, Seattle, Sacramento, Columbus with biggest HELOC increase

Among 50 metropolitan statistical areas with at least 5,000 total loan originations in the first quarter, those with the biggest year-over-year percentage increase in HELOC originations were Dallas, Texas (up 35 percent); Louisville, Kentucky (up 28 percent); Seattle, Washington (up 25 percent); Sacramento, California (up 25 percent); and Columbus, Ohio (up 23 percent).

Other metro areas with a 20 percent or more increase in HELOC originations from a year ago were San Antonio, Texas (up 23 percent); Orlando, Florida (up 23 percent); Portland, Oregon (up 22 percent); Cincinnati, Ohio (up 21 percent); and Tampa, Florida (up 20 percent).

“Loosening credit, low interest rates and the first time millennial buyers moving into the South Florida real estate market all add up to an 8 percent increase in purchase loan originations for the first quarter this year over last year’s first quarter,” said Mike Pappas, CEO and president at The Keyes Company, covering South Florida. “Our rising prices and increasing equity are giving confidence to homeowners as we have seen HELOCs increase 12 percent year-over-year.”

Baltimore, Tucson, Louisville, Minneapolis, Nashville with biggest purchase loan increase

Metro areas with the biggest year-over-year percentage increase in purchase originations were Baltimore, Maryland (up 26 percent); Tucson, Arizona (up 18 percent); Louisville, Kentucky (up 17 percent); Minneapolis-St. Paul (up 14 percent); and Nashville, Tennessee (up 14 percent).

Other metro areas with a more than 10 percent increase in purchase loan originations from a year ago were Washington, D.C. (up 13 percent); Cleveland, Ohio (up 13 percent); Atlanta, Georgia (up 12 percent); Indianapolis, Indiana (up 12 percent); Kansas City (up 11 percent); St. Louis (up 11 percent); and Chicago (up 11 percent).

Cincinnati, Philadelphia, Milwaukee, Raleigh, Salt Lake City with biggest refi decrease

Metro areas with the biggest year-over-year percentage decrease in refinance originations were Cincinnati, Ohio (down 35 percent); Philadelphia, Pennsylvania (down 32 percent); Milwaukee, Wisconsin (down 32 percent); Raleigh, North Carolina (down 31 percent); and Salt Lake City, Utah (down 29 percent).

Other metro areas with a 25 percent or bigger decrease in refinance originations from a year ago were Oxnard-Thousand Oaks-Ventura, California (down 28 percent); St. Louis (down 28 percent); Sacramento, California (down 28 percent); Tucson, Arizona (down 27 percent); Louisville, Kentucky (down 26 percent); Chicago, Illinois (down 26 percent); Richmond, Virginia (down 26 percent); San Diego, California (down 25 percent); and Honolulu (down 25 percent).

Loan origination dollar volume up 5 percent as HELOC dollar volume jumps 45 percent

Although the number of originations decreased from a year ago, the estimated total dollar volume of originations increased thanks to higher average loan amounts. There was an estimated $444 billion ($444,560,103,469) in total loan origination dollar volume in Q1 2016, up 5 percent from the previous quarter and up 5 percent from a year ago — the fifth consecutive quarter with a year-over-year increase in loan origination dollar volume.

The total dollar amount of purchase loans originated in the first quarter was an estimated $146 billion ($145,693,394,297), down 11 percent from the previous quarter but up 8 percent from a year ago. The total dollar amount of refinance loans originated in the first quarter was an estimated $204 billion ($203,593,423,522), up 8 percent from the previous quarter but down 9 percent from a year ago. The total dollar amount of HELOCs originated in the first quarter was an estimated $95 billion ($95,273,285,650), up 34 percent from the previous quarter and up 45 percent from a year ago.

FHA loan share increases annually for fifth consecutive quarter

Among all purchase and refinance loans, 17.5 percent were FHA loans, 8.3 percent were VA loans, 0.8 percent were construction loans, and the remaining 73.4 percent were other loan types, including conventional.

FHA loans as a share of all loan originations increased 7 percent from a year ago while the VA loan share were up 5 percent and construction loans were up 19 percent. The FHA loan share has increased for five consecutive quarters, and in 10 of the 11 last quarters.

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Maximizing Production In A Purchase World

Since the Mortgage Bankers Association forecasted a 36 percent decrease in total origination volume for 2014, there has been a lot of speculation as to how lending institutions can survive in an environment with decreased revenue from refinancing. While there are many lenders changing their business plans to compensate for this loss of volume, I rarely see investment in the most profitable strategies in the purchase market: an effective database-driven CRM and one-to-one marketing program. Mass marketing techniques only focus on output, whereas sophisticated one-to-one communication more effectively targets customers and crafts unique and relevant messages to produce true results. To thrive in today’s purchase market, lenders must effectively communicate with referral partners, prospects and past customers to generate purchase business.

Investing in relationships with referral partners is a key way to maintain additional sources of new business and fill your pipeline in a purchase world. The most important thing is to tap into these partnerships in ways that produce results. Engaging with referral partners through the ongoing communication of meaningful messages maintains engagement over the long term. To create shared customers, lenders should show real estate partners that they are committed to managing borrowers’ loans on a granular level throughout the lifecycles of these loans.

Ongoing communication with prospects is also critical to win in a purchase market. Communication should be timely, relevant and strategic, focusing not only on what the lender can offer the potential homebuyer but why it’s the perfect time to buy a home. A prospect is much more likely to become a customer if they understand in detail how their personal needs can be met even before they’ve signed a contract. Making the decision to purchase a house is an intimidating one, and potential customers need to be reassured that a lender is knowledgeable and invested in their situation. Automated marketing solutions that send relevant and timely messages to prospects immediately upon meeting them is an effective, results-driven solution.

Past customers already familiar with a lender’s work are the best source of new business in a purchase market. But while homeowners placed their trust in a lender once, they may not remember their experiences years down the road when it comes time to move. By sending regular one-to-one marketing to these customers after the close of a loan, you communicate that you’re still invested in managing their account and are looking for ways to help them save money in the future. Creating a meaningful dialogue with past customers reinforces a lender’s work ethic and reminds a homebuyer that they’re in good hands. Even if your past customers are not looking to move now, consistent contact makes them more likely to send referrals your way.

Maintaining strong relationships with referral partners, prospects and customers using one-to-one marketing can only be done with sophisticated database management and the use of Big Data. A centralized automated marketing system provides lenders with the ability to customize marketing material to create unique messages for each recipient. In contrast, mass marketing creates a single message that is then dispensed to the entire customer database. There isn’t much of a comparison as to which has a better chance of producing results and lenders who thrive in this new market will invest in these effective strategies.

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LOS And CRM Integrate

CRMnow, an enterprise CRM provider for lenders has completed a new integration between Mortgage iQ CRM and Lending QB LOS. The combined technologies represent a significant time savings and data integrity benefit for mortgage brokers and bankers.

According to Chris King, CEO of CRMnow, “Mortgage companies must operate more seamlessly in today’s environment in order to achieve profitability and growth.  We help them leverage our foundational CRM technology and marry that with Lending QB for a complete end–to-end experience. We integrate with the companies that our customers want and we see Lending QB achieving a lot of momentum in the mortgage technology space.”

Mortgage iQ is built specifically for the mortgage industry. Mortgage iQ streamlines lead management, provides strong sales force and marketing automation including lead tracking/qualification, credit analysis, loan scenarios plus personalized websites with an integrated Loan Application and Tracking Portal for Borrowers AND Real Estate Partners. It then completes the workflow with loan pipeline tracking, automated marketing tracks as well as integration with backend lending systems such as Lending QB alleviating redundant data entry.

“I am excited to announce the integration of CRMnow and LendingQB. With the bi-directional integration, our customers will experience a true seamless CRM/LOS solution,” said Binh Dang, LendingQB president.

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It’s Time For Lean Lending

Have you ever got out of bed and wished you could just go back to sleep? I’m sure that you have. We all lead busy and stressful lives. But the best of us move on and strive to be better every day. Here’s how one LOS is doing just that:

LendingQB, a provider of end-to-end loan origination software (LOS), has officially launched its Lean Lending strategies for the mortgage industry. Lean Lending utilizes lean manufacturing principles to help lenders reduce origination costs by up to 50%. Lean Lending guides lenders to streamline processes, ensure compliance, and drive continuous organizational improvement.

>> Streamlining processes by reducing costs by consolidating or eliminating certain functions. For example, lenders create a dedicated team to handle disclosure and re-disclosure activities instead of requiring a large staff of loan officers and processors.

>> Ensuring compliance by flagging compliance issues early in the process.  For example, a GFE Tolerance Monitor flags changes and detects when fees break the 10% tolerance, which prevents the loan from proceeding with a GFE tolerance violation.

>> Continuous improvement by LendingQB working with the lender to ensure that they’re fully utilizing the LendingQB platform.  For example, LendingQB will review and re-train the lender’s staff on the latest technology at no additional cost.

“It can take up to 3 years for lenders to understand a new LOS platform and create the best practices to take advantage of new technology,” said Binh Dang, LendingQB president. “LendingQB can shorten the learning curve to just 6 months by providing a lean set of best practices.”

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The Proactive LOS Will Win Out

As they say, the early bird gets the worm. Similarly, the LOS that stays ahead of market dynamics will win out. For example, Mortgage Builder has upgraded to its LoanXEngine product eligibility and pricing technology in order to help lenders become more efficient in the hedging and secondary marketing aspects of their business. The enhancements come at a time when lenders are dealing with reduced profits and higher origination costs due to increased regulatory requirements and declining loan volume. Here’s the scoop:

LoanXEngine offers full eligibility, best execution pricing, CRM, lead management, rate watch, rate sheet generation and web point-of-sale in one web-based system. LoanXEngine was launched in 2007 by Alan Johnson, who sold the company to Mortgage Builder in late 2012 and serves as executive vice president and head of the LoanXEngine division of Mortgage Builder Software, Inc. The standalone LoanXEngine technology was also integrated into the Mortgage Builder Suite of products in 2013, joining the Architect LOS, the Colonnade LSS and their complementary modules to create a true “front end-to end-to end” mortgage technology platform.

LoanXEngine’s enhancements include upgrades to pricing reports that enable secondary marketers to obtain optimal financial execution in loan sales, whether on a per-loan or multiple loan basis. The latest release also includes a new report created to boost hedging efficiency and results, markedly improving profitability for its users through better secondary marketing outcomes. LoanXEngine’s new Hedge/Pricing Management Report displays current best execution on a loan or searches for pricing on a specific target rate, presenting investors by name, product and all loan level pricing adjustments for transactional precision and speed.

A recent report from the Mortgage Bankers Association (MBA) showed that the third quarter of 2013 saw a 37 basis point drop in loan production profits for its members, the fourth consecutive quarterly reduction. It was especially alarming since it took the average profit per loan from $1528 in the second quarter down to $743, due to skyrocketing costs for quality control and compliance.

“Lenders are struggling to improve profitability, as shown by the report from MBA,” says Alan Johnson, who spent years developing the original LoanXEngine technology. “LOS systems like Mortgage Builder’s Architect can help them become more efficient by streamlining origination and eliminating paper, but improving the secondary marketing side of the business can have dramatic impact on profitability,” he notes. “LoanXEngine’s new capabilities are specifically designed to result in improved hedging and trades to enhance the bottom line at a time when production expenses are at record levels,” he says. “Whether lenders are using Mortgage Builder or another LOS, they can benefit substantially from the new improvements to LoanXEngine, particularly when the CFPB’s QM rules go into effect in January.”

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Tech Player To Acquire Risk Mitigation Firm

Surely with all the new rules hitting our space next month, every technology company with a dominant mortgage footprint is gearing up to ensure that its lenders are compliant. But it doesn’t end there. Risk mitigation and due diligence are here to stay. Realizing this trend, global IT and consulting firm Wipro Ltd. is getting ahead of the curve by signing a definitive agreement to acquire one of the leading U.S.-based providers of mortgage due diligence and risk management services for a purchase consideration of $75 million that includes a deferred earn-out component. Here’s the scoop:

Wipro has agreed to acquire Opus CMC (Opus Capital Markets Consultants LLC). The acquisition will strengthen Wipro’s mortgage solutions and outsourcing business and complement its existing offerings in mortgage origination, servicing and secondary market.

Founded in 2005 and headquartered in Lincolnshire, Illinois, Opus CMC provides comprehensive risk management solutions to the mortgage industry in the United States. It has over 490 employees, including over 315 loan underwriters, spread across 5 centers in the US.

Opus CMC offers operational and loan level due diligence, valuation support, forensic analysis, and advisory services on all classes of mortgage products, residential and commercial, ranging from re-underwriting whole loans to collateral reviews of securitized pools. Its customers include several of the top global banks, mortgage conduits, mortgage investors, and independent mortgage originators.

“We welcome Opus CMC’s employees to the Wipro family,” said Manoj Punja, Senior Vice President and Head – BPO, Wipro Limited. “This acquisition will help us expand in the high end Mortgage BPO segment, and brings differentiated capability with a platform-based risk management offering. Opus CMC has an experienced management team with a deep understanding of the emerging needs of this business. Our vision is to leverage Wipro’s offerings with Opus CMC’s capabilities and knowledge base to create an end-to-end offering for all mortgage players, with a greater degree of automation and application of analytics.”

Opus CMC has been very successful in building a talented team that can address a wide range of quality management needs for mortgage product sellers, intermediaries and investors.  Its proprietary due diligence platform, encapsulates nearly a decade of business intelligence in loan reviews, and the latest in regulatory requirements.

“Our industry is at a pivotal point with the introduction of new mortgage regulations driven by the CFPB (Consumer Financial Protection Bureau) and government agencies. Wipro and Opus CMC will jointly assist our clients in navigating this challenging and changing business environment and help build reliable outcomes in mortgage origination and secondary market operations,” said Joseph Andrea and Jennifer LaBud, Co-founders and Principals, Opus CMC.

Commenting on this acquisition, Dan Latimore, Senior Vice President of Celent’s Banking Practice said, “A critical differentiator for mortgage industry participants going forward is the ability to manage risk and identify profitable growth opportunities in both existing loan portfolios and new originations. Execution capabilities in legacy books, combined with deep knowledge of regulatory frameworks and the ability to efficiently implement them, will be essential for success.”

The acquisition is subject to customary closing conditions and regulatory approvals and will be completed in Q4, FY-2014.

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