Rates hit a new low, Dana Wade takes issue with FHA loan limits, banks warn against using LIBOR and more of last week's top news
December 6, 2020 11:06 AM
Mortgage rates fall to new low, despite spike in Treasury yields
Mortgage rates dropped a basis point last week, reaching the lowest level since Freddie Mac started tracking this data, even though yields on the benchmark 10-year Treasury increased 7 basis points.
The 30-year fixed-rate mortgage averaged 2.71% for the week ending Dec. 3,down from the week before when it averaged 2.72%.
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The 30-year fixed-rate mortgage averaged 2.71% for the week ending Dec. 3,
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FHA's Dana Wade takes issue with 2021 loan limits
The 2021 FHA low-cost area forward loan limit for a single-unit property will increase to $356,362, or 65% of the new conforming mortgage limit.
But in high-cost areas, the new FHA limit is $822,375 for a single-unit home, or 150% of the 2021 conforming loan limit of $548,250. For conforming mortgages in high-cost areas, the loan limit is also $822,375.
The new limits have Federal Housing Commissioner Dana Wade concerned.
"FHA's mission is to support low-to-moderate income borrowers, so why does the law permit FHA to insure mortgages up to $822,375?" she asked in a press release. "This is a question for Congress and the taxpayers who stand behind FHA to answer."
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But in high-cost areas, the new FHA limit is $822,375 for a single-unit home, or 150% of the 2021 conforming loan limit of $548,250. For conforming mortgages in high-cost areas, the loan limit is also $822,375.
The new limits have Federal Housing Commissioner Dana Wade concerned.
"FHA's mission is to support low-to-moderate income borrowers, so why does the law permit FHA to insure mortgages up to $822,375?" she asked in a press release. "This is a question for Congress and the taxpayers who stand behind FHA to answer."
(Read full story
Mortgage firms set new record for per-loan profits even as costs rise
The money lenders make on each home loan hit another survey-record high in the third quarter despite increased expenses that put downward pressure on margins, according to the Mortgage Bankers Association.
The average pretax production profit for independent mortgage companies and home-loan subsidiaries of chartered banks was 203 basis points of the principal balance on each unit originated during the period. That translates to net income of $5,535 per loan.
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The average pretax production profit for independent mortgage companies and home-loan subsidiaries of chartered banks was 203 basis points of the principal balance on each unit originated during the period. That translates to net income of $5,535 per loan.
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Joshua Roberts/Bloomberg
Regulators warn banks against using Libor in new contracts
Federal regulators urged banks on Nov. 30 to stop using the London interbank offered rate, or Libor, in their contacts and to begin transitioning away from the benchmark “as soon as practicable.”
In an interagency statement, the Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corp. said that “[f]ailure to prepare for disruptions to USD LIBOR, including operating with insufficiently robust fallback language, could undermine financial stability and banks’ safety and soundness.”
(Read the full storyhere .)
In an interagency statement, the Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corp. said that “[f]ailure to prepare for disruptions to USD LIBOR, including operating with insufficiently robust fallback language, could undermine financial stability and banks’ safety and soundness.”
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Forbearances increase as trend spreads to all loan types
The rate at which borrowers suspended payments on their home loans rose for a second week in a row between Nov. 16 and 22, climbing 6 basis points to 5.54%, according to the Mortgage Bankers Association.
Even government-sponsored enterprise loans, which have seen forbearance rates drop for 24 weeks in a row, saw a slight uptick to 3.36% from 3.35%the previous week.
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Even government-sponsored enterprise loans, which have seen forbearance rates drop for 24 weeks in a row, saw a slight uptick to 3.36% from 3.35%
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FHA extends endorsements of mortgages in forbearance through year-end
The Federal Housing Administration followed Fannie Mae and Freddie Mac’s lead in giving lenders more leeway to continue submitting loans that go into forbearance. The FHA extended the cutoff by one month, to Dec. 31, 2020.
The extension of the FHA’s willingness toconditionally endorse loans with suspended payments came amid a renewed push by public and private entities to spread awareness of the CARES Act option, which allows distressed borrowers to temporarily put payments on hold if they have a coronavirus hardship.
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The extension of the FHA’s willingness to
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Purchase mortgage defect risk rises again amid a hot housing market
Loan application defect risk for purchase mortgages has continued to rise as the highly competitive home sales market provides an incentive for homebuyers to distort the truth, First American Financial said.
"More important for fraud risk is the continued sellers' market, which may pressure home buyers to misrepresent information on their loan application to win the bid for a home," Odeta Kushi, First American's deputy chief economist, said in a statement. "The winter months should cool the hot sellers' market, which may relieve pressure on overall fraud risk."
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"More important for fraud risk is the continued sellers' market, which may pressure home buyers to misrepresent information on their loan application to win the bid for a home," Odeta Kushi, First American's deputy chief economist, said in a statement. "The winter months should cool the hot sellers' market, which may relieve pressure on overall fraud risk."
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Why is Fannie Mae abandoning a practice that shields it from risk?
The mortgage giant Fannie Mae has drastically curtailed transferring credit risk to private investors this year, a move that industry veterans say could hurt taxpayers as the Trump administration tries to relinquish control of the government-sponsored enterprises.
The shift is partly due toa new capital framework devised for Fannie and Freddie Mac by their regulator, the Federal Housing Finance Agency, and has resulted in the percentage of Fannie’s single-family loans with credit enhancement — loans that have factors like transferred risk — falling to 45% as of Sept. 30, down from 53% at the end of last year.
“That means that risk is concentrated back on the balance sheet of Fannie and Freddie, and that's leaving more of it being absorbed by the taxpayer,” said Ed DeMarco, president of the Housing Policy Council and former acting director of the FHFA, who started the credit risk transfer program in 2013.
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The shift is partly due to
“That means that risk is concentrated back on the balance sheet of Fannie and Freddie, and that's leaving more of it being absorbed by the taxpayer,” said Ed DeMarco, president of the Housing Policy Council and former acting director of the FHFA, who started the credit risk transfer program in 2013.
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Digital mortgage firm Beeline expanding, hiring, adding new technology
Beeline, an online mortgage banker started by a team split between the United States and Australia, is moving into nine new U.S. markets, hiring 100 people and releasing a new underwriting conditions engine.
The company’s platform aims to help borrowers apply for home loans in as little as 15 minutes by automating immediate validation of bank information used in qualification, according to a company press release.
“What’s really different about our technology is that it actually uses artificial intelligence to collect that data and verify it right away,” said Jess Kennedy, Beeline’s co-founder, general counsel and chief compliance officer. “A beeline is the shortest path to get somewhere and that’s really what we wanted to provide.”
(Read full storyhere .)
The company’s platform aims to help borrowers apply for home loans in as little as 15 minutes by automating immediate validation of bank information used in qualification, according to a company press release.
“What’s really different about our technology is that it actually uses artificial intelligence to collect that data and verify it right away,” said Jess Kennedy, Beeline’s co-founder, general counsel and chief compliance officer. “A beeline is the shortest path to get somewhere and that’s really what we wanted to provide.”
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Guild's 3Q income climbs over 2,000% on record originations
Guild Holdings, the latest nonbank mortgage company to go public, had an over 2,000% year-over-year increase in its third-quarter net income, as it benefited from record origination activity in the market.
The company had net income of $182.1 million in the third quarter, up from $8.5 million for the same period last year. Its third-quarter results are in the middle of the range it expected when the companyannounced its initial public offering in October.
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The company had net income of $182.1 million in the third quarter, up from $8.5 million for the same period last year. Its third-quarter results are in the middle of the range it expected when the company
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