Monthly Archives: June 2016

Brexit: The Impact on U.S. Loan Officers

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As we discussed in our most recent newsletter, the citizens of the United Kingdom made the historic decision to leave the European Union on June 23rd, throwing a wrench into the global economy. While a two-day freefall in U.S. markets (as well as global markets) ensued, U.S. investors have now regained their footing.

As you will see, the U.S. real estate market is poised for more?not less?growth following Brexit, and lenders and loan officers are likely to be the first ones to benefit.

Treasury Yields Falling

As of June 28th, the yield on the 10-year U.S. Treasury was around 1.46%. Prior to the U.K. vote it was 1.74%. Though currencies and U.S. stocks have recovered somewhat, the prevailing uncertainty is likely to bring the 30-year mortgage rate lower than the previous all-time low of 3.31% set in November 2012. Interestingly, the 10-year Treasury yield stood at 1.65% in November 2012, meaning that Treasury yields need not fall much further for mortgage rates to continue the downward trend. Even if the spread between mortgage rates and the Federal Fund Rate tightens, mortgage rates may continue to drop.

As with any stock market downturn, the current panic will create new winners and losers. But real estate, which has been one of the best performing sectors since the Great Recession, is likely to add to its gains.

New Winners and Losers

One of the hardest hit sectors during the Great Recession was the U.S. housing market. The Federal Reserve responded to the crisis by lowering the Federal Fund Rate, which encouraged investment and lowered mortgage rates. By all accounts, this strategy has worked and real estate has outperformed nearly all other sectors since the crash. With yet another round of uncertainty, the Fed has backed off its hawkish line and reduced its projected interest rate hikes for 2016 from two to one. Besides being good news for consumers, this is great news for people looking to buy a home or refinance an existing mortgage. And it is also good for banks and loan officers, who will have no trouble drumming up business when all other investments seem to offer far more risk than reward.

New Mortgage Predictions

In May, the Mortgage Bankers Association (MBA) revised its predictions for new mortgages and refinances in 2016 for the fourth time this year. Currently the MBA expects $1.68 trillion in new mortgages for 2016. At the beginning of the year, the association expected only 1.38 trillion. The total for 2015 was $1.63 trillion. Anybody who has followed the market and the state of the economy over the last year can tell you that uncertainty has only increased. Around a year ago, it was the collapse of the sudden slowing of the Chinese economy. Six months later it was increased interest rates. Now, it?s Brexit. Throughout it all, the housing market and the mortgage industry have experienced solid growth and steady upward revisions.

Housing Demand Strong

An ancillary benefit of Brexit is that as the British Pound and the Euro are under pressure, making the U.S. dollar a better home for foreign investments. This should encourage foreign real estate buyers from China and elsewhere to pull up stakes in Europe and invest in U.S. properties.

Meet Demand and Stay Compliant with Acuity National Real Estate Solutions

Acuity National Real Estate Solutions is a technology-driven title agency offering cutting-edge tools to help lenders and loan officers reduce cost, increase compliance, and streamline closings. For more information, please visit our homepage today!

First-Time Homebuyer Program Solidifies New Trend

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JP Morgan Chase has quietly launched their first 3% down mortgage lending program, providing a low-cost outlet for first-time homebuyers ? backed by lending giant Fannie Mae.

The Program

Chase?s new program is the latest in a recent trend of lenders offering non-FHA-affiliated mortgages, alongside similar initiatives from Bank of America and Wells Fargo (announced January 2016 and just last week, respectively). The Chase program comes with a comparatively restrained set of standards, requiring a minimum 680 FICO score and first-time-homebuyer status for at least one signer.

Chase representatives provided more detail to HousingWire in May, stating that the initiative (called ?Standard Agency 97% Program?) will allow customers with a 95 to 97% loan-to-value (LTV) ratio to make additional contributions in the form of a strings-free gift. This can greatly bring down closing cost and down payment obligations. Even more intriguingly, customers with a sub-95% LTV are allowed to put 0% down. The program as a whole is designed to incentivize interested customers with low liquid assets to buy immediately and create a ?sustainable ownership? model for moderate incomes.

The Rationale

FHA lending has been a sore spot for many lenders in recent months, with the Department of Justice cracking down on alleged violations by organizations like Guild Mortgage. In fact, Chase CEO Jamie Dinmon indicated that the company may be moving away from real estate lending altogether as recently as this April. In a yearly shareholder letter, he cited high-stakes compliance efforts and accompanying lack of room for error as a major disincentive to continue providing these loans.

So why the change of heart? Customer relations. Dimon stated that while Chase is moving away from FHA loans, it will continue to pursue Fannie Mae-backed originations to create and sustain lifelong relationships with homebuyers. From the organization?s view, the program is more of an investment in customer partnership than in dramatic financial returns.

A New Tradition

It?s important to remember that while the Standard Agency 97% is a significant move for Chase?s courtship of low-asset homebuyers, it?s not by any means their first foray into the arena. The organization has provided a 5% down ?DreaMaker Mortgage? program for several years, which also includes flexible closing options, looser insurance requirements, and reduced payment plans. However, the approval standards ? a lower FICO score and specified income limit ? makes the Standard Agency an appealing choice for qualifying buyers.

Innovate with Acuity National Real Estate Solutions

As a leader in technology in the title industry, Acuity National Real Estate Solutions is the ideal partner for lenders and loan officers looking to stay on the cutting-edge of a rapidly evolving industry. To learn more about the comprehensive suite of services we offer to loan officers, lenders, and realtors, please visit our homepage.

Mortgage Servicing Rights ? A Perfect Storm Brewing for Lenders and Consumers?

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With ever-tightening TRID regulations ? all the way from organizations down to the individual ? and an increasing supply/demand mismatch, many mortgage professionals are getting nervous about what servicing rights will look like in 2016 and beyond.

Issue Background ? Basel III

2009?s Basel III reform measures set a three-year plan in place to tighten banking security, risk management and oversight strategy. Crafted specifically in response to the credit and housing bubble of 2008, the rulings codified capital requirements and leverage ratios for banks that up until that point had gone unspecified.

Ultimately, Basel III is intended to heighten the financial and banking landscape?s resilience, reducing the threat of system-wide impact and stabilizing it against economic stress. A side effect of these regulations is increased transparency ? and reduced overall servicing capacity.

Consumer Impacts

The capital requirements leveled by Basel III are uniformly capped, but different kinds of loans (within and without the mortgage sector) are differently weighted. This has led major banking conglomerates like Wells Fargo and Chase to examine their long-term prospects for servicing: given the new requirements and increased human capital necessitated by compliance efforts, will it actually be worth the time?

An acceptable return on investment may necessitate higher pricing, which in turn reduces the available customer base ? even in the face of ever-heightening demand as the economy recovers from the 2008 bubble. The Fed?s end-of-year mortgage rate hike has been widely seen as a vote of confidence in the market?s recovery, but have since dropped a quarter-percent. Lenders who spent the first quarter of 2016 in the black have since reported massive markdowns, further dampening service pricing and increasing demand pressure.

A Situation in Development

While the situation may be concerning on its face, there are some factors at play whose as-of-yet unseen effects may tip the scales. In anticipation of rising rates, non-bank investors paid a premium for loan servicing throughout 2015 ? but have scaled back in the new year. Additionally, lenders have begun to shy away from co-issue bidding (selling assets directly to mortgage loan companies and outsourcing servicing to specialized organizations), which up until recently accounted for over half of all servicing sales. This demand drop will have an unavoidable impact on servicing valuation (and, thus, consumer price) which is still playing out in the market.

Increase Compliance and Meet Demand with Acuity National Real Estate Solutions

Acuity National Real Estate Solutions provides lenders and loan officers the information they need to stay on top of key industry trends. We also offer an all-inclusive suite of title services made to reduce costs and streamline closings in today?s unforgiving regulatory environment. To learn more about our offerings, please visit our homepage today.

How a California Personal Injury Case Could Affect Mortgage Lenders Nationwide

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What does a recent Supreme Court decision on Spokeo.com, an online personal information aggregator, have to do with TILA-RESPA Integrated Disclosure? Not much, on its face, but a recent Inman article about a California class-action lawsuit leveled against Spokeo argues that the suit may have big implications for TRID-affected industries.

The Suit

Spokeo.com?s purpose is to collect and display information like age, employment, marital status and education on individuals. In 2011, Thomas Robins filed a class action suit against the site, alleging that the information displayed was inaccurate. Spokeo?s rebuttal stipulated that the information was indeed inaccurate, but that Robins suffered no actual harm from its display.

The Constitution?s Article III states that the plaintiff must display ?concrete harm? in order to hold the defendant responsible and receive damages. The 9th Circuit Court of Appeals ruled that there was an implicit ?private cause of action? to enforce statutory rights ? which is to say, if those statutory rights have been impinged upon, the procedural violation itself is adequate cause to level suit even if no harm has taken place. In response, Spokeo took the case all the way up to the Supreme Court, which vacated the 9th Circuit?s ruling and sent it back down the chain for further examination.

The Connection

So what does this all have to do with TRID compliance? The question of concrete harm versus procedural violation. As many of us in the mortgage industry know, TRID compliance is a tricky transition that?s still causing waves ? and will likely cause more as the grace period draws to a close.

If the court rules that inaccuracies themselves are cause for suit, even if those inaccuracies cause no harm to the client, it opens up mortgage professionals and loan officers to an enormous amount of liability and adds pressure to an already-over-boiling pot. Suddenly the industry will be faced with not just compliance demands, but also the potential need to defend themselves against meritless ? but costly ? lawsuits.

Technology & Compliance: Acuity National Real Estate Solutions

Acuity National Real Estate Solutions is a full-service national title insurance company offering numerous closing and title products. We are proud to work with lenders and loan officers across the country to streamline closings, reduce costs, and increase compliance. For more information on our client portal for document organization and our round-the-clock closing hotline, please visit our homepage.