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30-Year Fixed Rate Drops, Refis Tick Up Slightly

According to the March Origination Insight Report from Ellie Mae, the 30-year note rate dropped for the third straight month to 4.77 percent, down from 4.86 percent in February and 5.01 percent in January. The percentage of refinances on all loans increased to 35 percent, up from 34 percent the month prior.


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“As we enter the busy spring home buying season, we are seeing activity tick back up across the board with the 30-year note rate decline,” said Jonathan Corr, President and CEO of Ellie Mae. “We will continue to watch closing rates as they have stayed at or above 75 percent through the first quarter of 2019, a possible indication of buyers’ conviction.”


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Other statistics of note in March included:

The percentage of FHA refinances increased to 23 percent in March, up from 20 percent in February.


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Time to close all loans continued to decrease. Time to close all loans was 42 days in March, down from 43 in February and 45 in January. The time to close a purchase loan dropped to 45 days in March, down from 47 in February and 49 in January.

The percentage of Adjustable Rate Mortgages (ARMs) decreased to 7.4 percent, down from 7.6 percent in February.


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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. Ellie Mae believes the Origination Insight Report is a strong proxy of the underwriting standards employed by lenders across the country.

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.

New Home Purchase Mortgage Applications Rise In January, But Remain Flat Year-Over-Year

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for January 2019 shows mortgage applications for new home purchases remained unchanged from a year ago. Compared to December 2018, applications increased by 43 percent. This change does not include any adjustment for typical seasonal patterns.


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“After two lackluster months, new home sales surged almost 30 percent in January to the fastest pace since our survey began in 2013,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “ The healthy job market, faster wage growth, moderating price gains and lower mortgage rates,  all helped home sales recover. Additionally, builders seem to be seeing improvement in their labor shortages, as government survey data showed increases in construction hiring and openings in December.”


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MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 713,000 units in January 2019, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.


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The seasonally adjusted estimate for January is an increase of 29.2 percent from the December pace of 552,000 units. On an unadjusted basis, MBA estimates that there were 54,000 new home sales in January 2019, an increase of 45.9 percent from 37,000 new home sales in December.


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By product type, conventional loans composed 68.7 percent of loan applications, FHA loans composed 18.6 percent, RHS/USDA loans composed 0.5 percent and VA loans composed 12.2 percent. The average loan size of new homes decreased from $334,944 in December to $334,532 in January.

MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.

Refinances Drop 21% In Q3 2018

ATTOM Data Solutions released its Q3 2018 U.S. Residential Property Mortgage Origination Report, which shows that 681,455 refinance mortgages secured by residential property (1 to 4 units) were originated in the third quarter, down 15 percent from the previous quarter and down 21 percent from a year ago to the lowest level as far back as data is available — Q1 2000.

The refinance mortgages originated in Q3 2018 represented an estimated $175.1 billion in total dollar volume, down 14 percent from the previous quarter and down 21 percent from a year ago to the lowest level since Q1 2014 — a 4.5-year low.

“Rising mortgage rates continued to dampen demand for mortgages in the third quarter, particularly refinance mortgages,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “There were some notable exceptions to that trend, primarily in markets affected by the hurricanes in the third quarter of 2017.”

Refinance originations increase in Houston, Miami, Tampa

Residential refinance mortgage originations decreased from a year ago in 197 of the 225 metropolitan statistical areas analyzed in the report (88 percent), including Los Angeles (down 31 percent); New York (down 11 percent); Dallas-Fort Worth (down 5 percent); Phoenix (down 14 percent); and Atlanta (down 33 percent).

Counter to the national trend, residential refinance mortgage originations increased from a year ago in 28 of the 225 metro areas analyzed in the report (12 percent), including Houston (up 69 percent); Miami (up 29 percent); Tampa-St. Petersburg (up 33 percent); San Antonio (up 3 percent); and Orlando (up 30 percent).


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Purchase mortgage originations down 2 percent from year ago

Lenders originated 892,760 residential purchase mortgages in Q3 2018, down 5 percent from the previous quarter and down 2 percent from a year ago.


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Residential purchase mortgage originations decreased from a year ago in 121 of the 225 metropolitan statistical areas analyzed in the report (54 percent), including New York (down 6 percent); Dallas-Fort Worth (down 5 percent); Chicago (down 14 percent); Phoenix (down 2 percent); and Los Angeles (down 14 percent).

Counter to the national trend, residential purchase mortgage originations increased from a year ago in 104 of the 225 metro areas analyzed in the report (46 percent), including Atlanta (up 12 percent); Houston (up 3 percent); Miami (up 2 percent); Tampa-St. Petersburg (up 3 percent); and Nashville (up 1 percent).

HELOC originations down 11 percent from year ago

A total of 313,744 Home Equity Lines of Credit (HELOCs) were originated on residential properties in Q3 2018, down 14 percent from the previous quarter and down 11 percent from a year ago.


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Residential HELOC mortgage originations decreased from a year ago in 150 of the 225 metropolitan statistical areas analyzed in the report (67 percent), including New York (down 14 percent); Los Angeles (down 18 percent); Seattle (down 3 percent); Chicago (down 27 percent); and Philadelphia (down 16 percent).

Counter to the national trend, residential HELOC mortgage originations increased from a year ago in 73 of the 225 metro areas analyzed in the report (32 percent), including Miami (up 4 percent); Tampa-St. Petersburg (up 22 percent); Kansas City (up 20 percent); Orlando (up 3 percent); and Omaha (up 11 percent).

Median down payment percentage at nearly 15-year high

The median down payment on single family homes and condos purchased with financing in Q3 2018 was $20,250, up 7 percent from the previous quarter and up 16 percent from a year ago to a record high as far back as data is available, Q1 2000.

The median down payment as a percentage of the median home sales price in Q3 2018 was 7.6 percent, up from 7.2 percent in the previous quarter and up from 6.8 percent in Q3 2017 to the highest since Q4 2003 — a nearly 15-year high.

Among 96 metropolitan statistical areas analyzed in the report for down payments, those with the highest median down payment as a percentage of median home sales price in Q3 2018 were San Jose, California (24.7 percent); San Francisco, California (23.3 percent); Los Angeles, California (20.6 percent); Oxnard-Thousand Oaks-Ventura, California (19.0 percent); and Fort Collins, Colorado (18.6 percent).

FHA loan share increases from more than 10-year low in previous quarter

Residential loans backed by the Federal Housing Administration (FHA) accounted for 10.5 percent of all residential property loans originated in Q3 2018, up from a more than 10-year low of 10.2 percent in the previous quarter but still down from 12.5 percent a year ago.

Residential loans backed by the U.S. Department of Veterans Affairs (VA) accounted for 5.5 percent of all residential property loans originated in Q3 2018, up from 5.4 percent in the previous quarter but still down from 6.6 percent a year ago.

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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Unlocking The Purchase Market

Purchase loans as a percentage of lenders’ overall mortgage volume eclipsed 50 percent in April, according to the latest Origination Insight Report released by Ellie Mae. Last month’s overall purchase share of 52 percent represented a 6 percent jump from March. Here’s what happened:

According to the latest report, the average closing period for all loans rose from 44 to 45 days. Meanwhile, the overall closing rate on all loans exceeded 65 percent for the first time since reporting began in August 2011, reaching 65.2 percent.

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“An improving economy and ongoing attractive rates seem to be contributing to the rise in purchase percentage as we move full speed into the spring buying season,” said Jonathan Corr, president and CEO of Ellie Mae.

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The Origination Insight Report mines its application data from a robust sampling of approximately 66 percent of all mortgage applications that were initiated on the Encompass all-in-one mortgage management solution. Ellie Mae believes the Origination Insight Report is a strong proxy of the underwriting standards employed by lenders across the country.

Refi Madness

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RickShargaThe offer came in an envelope that looked like it was from a government entity, perhaps the Department of Treasury.

In bold type, the envelope told me that I qualified for a “new government program” that would save homeowners like me thousands of dollars by allowing me to finance at today’s historically low interest rates. It was “urgent” that I respond “immediately,” since the program would expire soon. All I needed to do was call a toll-free number, visit a website or fill out and mail back the enclosed form, and I would be on my way to financial freedom.

There was only one problem with this scenario: None of it was true.

As most people in the mortgage industry know, there are no new government programs aimed at saving borrowers thousands of dollars. The program so breathlessly described in the promotional mailer was, in fact, the Home Affordable Refinance Program (HARP), which hardly qualifies as “new,” since it began in March of 2009. HARP was created to allow underwater borrowers (borrowers who owe more money on their homes than their homes are worth) to refinance at current market rates, often without the added burden of mortgage insurance. The program, which has been modified to allow more borrowers to qualify, also isn’t expiring any time soon; it’s scheduled to end on December 31, 2015.

Besides the fact that the program isn’t new, or about to expire, the other problem with the offer is that I don’t meet either of the major criteria that would allow me to qualify for HARP. I have – fortunately – never been underwater on my loan, and thanks to explosive home price appreciation in California, have seen my equity increase dramatically over the past few years. My loan is not, nor has it ever been, owned by Fannie Mae or Freddie Mac. And besides all of this, my interest rate (2.85%) is below anything I could hope to get from a HARP refi, so I also wouldn’t be able to save thousands of dollars.

Most of this is information that the mortgage company could have found out about fairly easily, given the wealth of public record data available. So I’m left wondering whether they had the information and purposely sent me a misleading offer, or simply decided not to bother screening the borrowers they sent the mailing to, knowing full well that a fairly high percentage of them wouldn’t be eligible for the “new government program” they “qualified” for. Neither is a terribly attractive option, nor the kind of marketing approach that will rebuild the trust and confidence in the industry that has been lost during the housing boom and bust, and the long, bumpy post-recession recovery.

This particular offer came from a small, relatively new non-bank lender, obviously looking to gain market share however it could. But sadly, more established entities aren’t exactly doing the kind of marketing their mothers would be proud of either.

Case in point: my mortgage servicer, a long-established provider, part of a very large, well-regarded, publicly-traded company, also sent me a letter encouraging me to refinance my loan shortly after I received the faux HARP offer.

This letter encouraged me to refinance my adjustable rate mortgage (ARM) into a new 20-year fixed rate loan since “interest rates are rising.” The letter went on to say that in the case of my particular loan, my rates could go as high as 11.38% over the life of the loan, and that by refinancing into a loan with a 4.48% APR, I could save over $2,000 a month, or almost $25,000 a year. If true, that would work out to almost $500,000 in savings over the life of the loan.

Unfortunately, most of this wasn’t true either.

While it’s true that my interest rates could, eventually, go as high as 11.38%, there’s an annual cap of two points, and my annual adjustment sets the interest rate on my loan at LIBOR plus 2. So my interest rate for the past year has been 2.85%. Based on today’s LIBOR rate of about 1.10%, my rate would go up to about 3.1% at the next reset period – a far cry from 11.38%, and still more than a point better than the 4.48% APR offered by my servicer. In fact, even if interest rates began to go up steadily (something virtually no one is predicting), it would take five years of consecutive max-level interest rate increases to get me to the 11.38% threshold.

But it gets worse.

In order to estimate my “savings,” the servicer did the calculations based on the maximum 11.38% APR and the amount I owe on the loan today. That, frankly, is an impossible combination: There’s no way my loan can reset to the highest possible rates in less than five years; and there’s no way that I won’t have paid down a significant amount of the principal balance on my loan over that period of time.

Here’s how far off the calculations are: If my APR goes up to 3.1% in 2015, my payments will still be over $600 per month lower than the refi offer; if the APR goes up by the maximum two points in 2016, my payments will still be almost $200 per month lower than the refi offer. If the rates go up again by two points in 2017, the refi offer – finally – would be a better deal, saving me about $350 per month – but nowhere near the $2,000 a month “savings” I was promised. Assuming that the APR continues to go up by two points a year, and assuming that I’d be paying off exactly the same amount of principal balance every year, my loan payments would peak in 2019, but still be $800 less per month than in the horror story scenario presented to me by my loan servicer.

We all understand that this is largely an academic exercise – I’ll obviously refinance at some point when interest rates start to increase significantly enough for it to make economic sense for me to do so. But now there’s virtually no chance that I’ll refinance with my servicer’s company, because I’m left to contemplate these horribly unattractive possibilities:

>> The servicer was purposely misrepresenting the terms of my loan and presenting me with false information

>> The servicer didn’t understand the terms of my loan, or how the reset periods worked, and accidentally presented me with inaccurate information

>> The servicer is just really, really bad at math, and was hoping that I wouldn’t notice

None of these inspires me with great confidence, nor do they encourage me to do further business with this servicer. So neither of these companies will get my refinance business when the time comes.

But more troubling to me is the prospect of what’s happening when other borrowers – people who haven’t spent years inside the industry, or who don’t understand the fine print in their loan documents – receive offers like this. And what these types of offers do to the reputation of the industry in general.

How many borrowers responded to similarly-worded “new government program” offers only to be disappointed? How many blindly followed the advice of their lender or servicer to refinance their ARM now, since “interest rates are rising” only to pay hundreds or thousands of dollars that they didn’t need to – and shouldn’t have been tricked into paying? How much damage are rogue players causing to the reputation of the majority of lenders and servicers who try to – and want to – do what’s right for their customers?

Many people in the industry, with some justification, would like to be able to turn the page on the boom/bust/meltdown saga, and move on to the next chapter of the market’s recovery, unencumbered by needless legislative restrictions and strangling regulatory constraints. But trust, once broken, is difficult to recover. Especially when the behavior that caused the breakdown in trust looks like it might be coming back.

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Don’t Run For The Hills

Challenging times are ahead. The Mortgage Bankers Association (MBA) lowered its forecast for mortgage originations in 2014 by $57 billion to $1.12 trillion for the year, based on declining mortgage application activity and increasing interest rates.

“Despite an economic outlook of steady growth and a recovering job market, mortgage applications have been decreasing – likely due to a combination of rising rates and regulatory implementation, specifically the new Qualified Mortgage Rule,” said Mike Fratantoni, Chief Economist for MBA. “As a result, we have lowered our expectations for both purchase and refinance originations in the first half of 2014. Purchase originations are now expected to be $677 billion for 2014, compared to $711 billion forecast previously. Compared to 2013, purchase originations are expected to increase by 3.8 percent.”

Refinance originations were revised lower as well and are now expected to be $440 billion in 2014, compared to $463 billion estimated previously. The updated refinance total is around 60 percent lower than 2013 refinance originations.

I know this news was not welcomed. Fewer originations is nothing to cheer about. However, as is my way, I see the good in all of this. First, the need for mortgage lending isn’t going away. People are always going to want to buy houses. The fact is the mortgage industry is needed and is an essential part of the economy. So take comfort in the fact that you are doing needed work.

Second, good lenders shouldn’t worry. If you offer a top-notch process that offers the borrower a good experience you will be ahead of the game. You want to be as close to the borrower as possible. The days of loan officers being glorified order takers are over. Loan officers have to be trusted advisors that cultivate relationships.

So, don’t run for the hills just yet, know that you are doing essential work and get to know every borrower possible.

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Originations Are Falling

The Mortgage Bankers Association (MBA) lowered its forecast for mortgage originations in 2014 by $57 billion to $1.12 trillion for the year, based on declining mortgage application activity and increasing interest rates.

“Despite an economic outlook of steady growth and a recovering job market, mortgage applications have been decreasing – likely due to a combination of rising rates and regulatory implementation, specifically the new Qualified Mortgage Rule,” said Mike Fratantoni, Chief Economist for MBA. “As a result, we have lowered our expectations for both purchase and refinance originations in the first half of 2014. Purchase originations are now expected to be $677 billion for 2014, compared to $711 billion forecast previously. Compared to 2013, purchase originations are expected to increase by 3.8 percent.”

Refinance originations were revised lower as well and are now expected to be $440 billion in 2014, compared to $463 billion estimated previously. The updated refinance total is around 60 percent lower than 2013 refinance originations.

My Mortgage Experience, Part 2

A few columns back I wrote that my wife and I were in the home stretch of refinancing our mortgage through the HARP program after several years of being told we weren’t eligible. Well, I’m happy to report that we closed on the loan a couple of weeks ago and now will be able to pay off our mortgage in half the time we would have been able to do under our old loan, saving tens of thousands of dollars in the process.

Unfortunately, we could have saved a whole lot more if we had been able to refi a few years ago, when HARP was first rolled out. If only I knew then what I know now.

In that earlier column, I noted that “one of the reasons we had trouble knowing if we were eligible for HARP was because it was difficult to know for sure if Fannie or Freddie owned the loan in the first place. You can use Fannie or Freddie’s website to check, but unless your address matches up exactly with theirs, you won’t get an accurate answer.”

It turns out I didn’t know the half of it. I had no idea just what a big mess an incorrect address really is and what lengths you have to go through to fix it.

While calling Sports Illustrated or Ducks Unlimited to correct your address takes one telephone call to a customer service rep, Fannie Mae requires a full “support team” to do this. And this “support team” meets all of once a month.

If you live in a condominium, like I do, or a co-op with a unit or apartment number, you’re much more likely to run into this predicament. And that can “wreak havoc in terms of refinancing or purchasing a home,” said Paul Anastos, president of Mortgage Master Inc. in Walpole, MA, where I got my refi. “It was a pretty big deal getting it changed so we could even do it.”

“Something as simple as a condo being listed as Unit 512 rather than #512 can result in the system identifying this as a loan that is ineligible for HARP,” says Patrick Ruffner, branch manager for Guaranteed Rate in Chicago. “While an instance like that is an easy one to correct by updating the file internally with the lender refinancing the loan, there are instances that are more difficult to solve.” Like mine, apparently.

“The biggest problem is these updates are processed once a month at the end of the month,” Ruffner says. “The borrower is stuck in limbo until Fannie/Freddie have updated their systems. Therefore, the borrower will be unable to move forward with their refinance until this has been corrected. Depending on when the current servicer asks the agencies to update the address, this can take weeks up to months to be corrected.”

“If it is within the last week of the month, they may push this correction to the following month, thus delaying the process further. This leads to a borrower that is unable to lock in a rate and move forward with the refinance until it has been updated in the relevant system. In a time when interest rates are volatile and every day could result in an increase of those rates, this can put the borrower’s savings in peril.”

“There definitely isn’t a sense of urgency,” said Anastos. “They make it much more difficult than they need to.”

Fannie Mae told me repeatedly that it didn’t own my loan, although my mortgage servicer insisted (correctly) that it did. I put every variation of my address I could think of into Fannie’s search engine and repeatedly came up with nothing. I even called Fannie by phone and spoke to a human being who told me they didn’t own the loan. It turns out that the address Fannie had for me wasn’t even close to the one the Post Office or my servicer recognizes.

(This, of course, begs the question: If Fannie Mae didn’t own my loan, where had my servicer been sending my principal and interest payments to every month for the past seven years?)

I called and emailed Fannie Mae at least four times to get a response for this column but never got one. For its part, Freddie Mac says it can make a “post-funded data correction,” as it’s called, in six to eight days, at any time of the month, provided the servicer has the proper documentation.

As Ruffner notes, a simple problem like this costs real money. I’d been trying to refi through HARP ever since it was first introduced in 2009. So I’ve been paying about twice the market rate for my loan over the past four years, which I assume cost me in the tens of thousands of dollars in extra interest.

Anastos brought up another point, which should make Fannie and Freddie and their lender partners stand up and take notice.

“A dishonest person could have tried to make a case that they shouldn’t have to repay the mortgage,” he said. Indeed, many borrowers faced with foreclosure tried that tactic, and some were successful.

I’m too honest a person to have attempted that. But I was sure angry enough to think about it.

Isn’t it reassuring to know that the same government that can’t fix a simple thing like your address now wants to fix your health insurance?

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