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Public companies in the mortgage industry have to act swiftly and decisively to continuously meet the demands of both their customers and shareholders. They are often a bellwether of broader industry changes, particularly during a cyclical market shift.

From pockets of growth in a shrinking refi market to the possibility of real estate investment trusts buying agency risk-sharing securities, here's a look at recent market shifts that major industry players are focused on right now. The insights come from presentations at a recent conference hosted by investment banking firm Keefe, Bruyette & Woods.
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Labor shortages vex homebuilders

While home construction showed modest growth in the Federal Reserve's latest Beige Book, that economic report also indicated there are construction labor shortages, said Michael Fratantoni, chief economist of the Mortgage Bankers Association.

Shortages for skilled and unskilled workers exist more broadly as well. A manufacturing firm in the Chicago Fed district, for example, recently raised wages 10% in order to attract and improve retention of its unskilled workforce.
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Ansteigende Stapel mit Münzen und einem Haus im Hintergrund

Not all refis are declining

Refinance volume has dropped overall, but cash-out refis have grown to the point where they now represent close to 50% of all refi loans, said Fratantoni.

Also growing is the presence of millennials in the market. Millennials are good prospects for cash-out refi programs such as one that government-sponsored enterprise Fannie Mae has for student loan borrowers.
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Torn dollar with REIT (Real Estate Investment Trust) paper message

The GSEs are trying to get REIT eligibility for risk-sharing

Fannie Mae and Freddie Mac are trying to get REIT eligibility for their credit risk transfer securities.

The GSEs plan to do this by using a real estate mortgage investment conduit election when they buy loans for securitization. REITS like Redwood Trust Inc. have taken note of it, said President and CEO Martin Hughes.
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risk management crossword (new business concept)

Front-end GSE risk sharing is progressing, but slowly

Mortgage insurer Radian Group Inc. is "walking before we run," in terms of its participation in front-end risk sharing pilots with the GSEs, said CEO Richard Thornberry.

"I think we're learning a great deal," he said, but so far the company's involvement in front-end risk sharing "is not significant."
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Real Estate and Conctruction Market Going Up. Bright Sunny Real Estate and Economy Concept 3D Illustration.

Growing concerns about regional home price risk

MGIC Investment Corp. has been watching regional home price risk, and may adjust its market participation to account for it, President and CEO Pat Sinks said.

While national home prices have been climbing steadily, markets like Seattle and San Jose are experiencing disproportionate appreciation and there are pockets of distress. Prices in Tuscaloosa, Ala., for example, have fallen 17% so far this year.
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PMIERS 2.0 is a capital consideration for PMI carriers

Anticipation of revisions to the GSEs' private mortgage insurer eligibility requirements could make PMI carriers cautious when it comes to capital. The requirements are designed to ensure adequate capital buffers in the event of significant PMI claims.

"PMIERs 2.0 is on the horizon," said Sinks. "We don't want to take any strong capital actions until we see that."
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Scissors cutting paper with the word price written on it

Pricing gets more competitive in lender-paid MI

Pricing for mortgage insurance has been fairly stable recently, said Bradley Shuster, CEO and chairman of NMI Holdings Inc.

But competition, to the extent it exists, can be found in the lender-paid market, he said.
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