Mortgage Weekly Roundup – June 22

June 22, 2018 Best Rate Referrals

Mortgage Weekly Roundup – June 22

During the week ending June 20, the U.S. Commerce Department released May housing starts and loan originators were growing worried about market stability.

Profitability and volume are becoming increasingly pessimistic areas of concern for lending professionals. Recently, banks and mortgage lenders tightened belts as they navigated less predictable market conditions. From Q4 2017 and throughout most of 2018 to date, the industry has seen layoffs, mergers and some exits from the mortgage space altogether. In November of 2017, Capital One announced it would no longer offer mortgage lending in 2018. In Q1 2018, Movement Mortgage and Wells Fargo each experience layoffs of more than 100 employees.

Here are the big stories in the mortgage market for the week ending June 20. 

“Fannie Economist: Mortgage Market faces Turbulence”

Published by Scotsman Guide on June 15, 2018

  • Lenders are taking a pessimistic view of the mortgage market.
  • Many prospective homebuyers took advantage of rate locks or rate lock extensions to avoid incurring additional costs from rising interest rates.
  • Overall refinance volume in 2018 has been shallow.
  • The mortgage industry has the capacity to lend to more borrowers, but new applications have fallen and new home purchases are relatively flat year over year.
  • Borrowers who purchased with interest rates of 3.5-4.0% are reluctant to move and are opting to stay in homes longer than years prior.
  • Doug Duncan, Fannie Mae’s chief economist, predicted 5% for the 30-year fixed mortgage by the end of 2018.

“Mortgage Rates Roar Higher After Brief Lull”

Published by MarketWatch on June 15, 2018

  • The 30-year-fixed rate mortgage inched up last week to 4.62%, according to Freddie Mac, much higher than the 4.40% overall average for 2018.
  • Loan originators are feeling “pinched” with the combined pressures of heightened rates, increase buyer demand and escalating prices of homes listed on the market.
  • Historically, when rates rose rapidly, lenders responded by broadening the size of their potential borrower pool to be inclusive of consumers who may not typically meet entry-level loan requirements, noted reporter Andrea Riquier.
  • There are fewer homeowners with adjustable-rate mortgages now compared to 2004-2006, reducing the opportunity to scale rate-based refinances.

“Homebuilder Confidence Falters on Rising Lumber Prices”

Published by Housing Wire on June 18, 2018

The cost of lumber continued a rapid climb, adding more pressure to homebuilders.

  • Canadian tariffs, which have contributed to the rising cost of lumber, may be a contributing cause of new single-family home prices ascending by $9,000 since January 2017.
  • Homebuilders are confident new home demand will continue to grow, but they are concerned the cost of new home construction will not be affordable for homebuyers or builders. 
  • “Builders do need access to lumber and other construction materials at reasonable costs in order to provide homes at competitive price points, particularly for the entry-level market where inventory is most needed,” said National Association of Home Builders (NAHB) Chief Economist Robert Dietz

“Falling Mortgage Applications Cloud U.S. Housing Outlook”

Published by Bloomberg on June 19, 2018

New application submissions have been flat for most of 2018, and refinancing plummeted to the lowest point since 2000, according to the Mortgage Bankers Association (MBA).

  • New construction permits were down in May, reported the Commerce Department. This is the third slip since January.
  • Volume for new purchase loans is remarkably lower than levels experienced during the last housing boom.

“US Housing Starts Jumped 5 Pct. in May Off Midwest Building”

Published by The New York Times on June 19, 2018

  • Housing starts in May 2018 are at their most robust pace since July 2007, the Commerce Department reported.
  • Home construction in the Midwest is the leading cause of the 62% jump in construction gains.
  • Economists are worrying about a potential trade war between the U.S. and Canada as lumber prices skyrocket due to Canadian tariffs.
  • Builders fear affordability risks due to the looming threat of additional taxes from on materials such as steel, aluminum and lumber.

“It’s Easier to Get a Mortgage in 2018, According to a New Study”

Published by Washington Post on June 20, 2018

  • Among non-confirming loans, more applications are being approved for “slightly riskier borrowers,” according to analysis by Core Logic.
  • The pool for eligible borrowers has expanded due to changes in debt-to-income ratio expectations and down-payment requirements.
  • Fannie Mae increased its debt-to-come ratio to 50% last year.
  • 20% of all borrower applications for non-conforming loans in 2018 had a debt-to-income ratio greater than 45%.
  • Conventional home loans with a down payment of 5% or less made up 9% of all homes purchased in Q1 2018.

What Do Recent Mortgage Reports Mean?

Many real estate agents are rejoicing from the news of housing start gains, but homebuilders and lenders remain concerned.

The extreme shortages in inventory over the last six months can be solved with boosts in new home construction, but tariffs are increasing builder woes. Lenders are experiencing net profit losses and falling application volume. As predicted, lenders are widening the spectrum of eligibility for borrowers once considered “risky,” actions that could be warning signs of the next housing bubble.

What Should Mortgage Marketers Do Next?

Among loan programs, purchase loans have the strongest opportunity for lender profitability due to rising listing prices.

Marketers should spend time evaluating an integrated marketing strategy that incorporates digital and traditional tactics focused on prospective first-time buyers. Evaluate your remaining budget for Q3 and Q4, and determine if you are spending your advertising dollars wisely to capture purchase market interest. Deploy a content marketing strategy to position your loan originators as experts while also promoting your unique products.

Contact the expert team at Best Rate Referrals to gain insight on how to best tackle current market conditions and win.


Sources:

https://www.thetruthaboutmortgage.com/a-list-of-recent-mortgage-closures-mergers-and-layoffs/

https://www.bls.gov/ooh/business-and-financial/loan-officers.htm

https://www.dallasnews.com/business/economy/2017/11/07/capital-one-shutter-home-loan-division-call-center-plano

http://narnewsline.blogs.realtor.org/2018/06/19/instant-reaction-may-housing-starts-2/

https://www.wsj.com/articles/u-s-housing-starts-rebound-in-may-1529411701?mod=nwsrl_europe_economy&cx_refModule=nwsrl

About the Author

Best Rate Referrals

Best Rate Referrals is an award-winning mortgage marketing firm and an industry leader in generating high-quality mortgage leads and driving inbound calls to mortgage lenders. The Best Rate Referrals team has broad mortgage market experience with proven lead generation practices that produce measured results for the lending and real estate industry. Best Rate Referrals has a long history of connecting high-intent consumers with a diverse network of lenders for a variety of financing products including Home Purchase, HARP, VA, FHA, Cash-Out, 203k, USDA, Conventional, Reverse Mortgage, ARM, Fannie Mae, Freddie Mac, First-Time Homebuyer, Jumbo and Debt Consolidation. The company's flagship website, www.MortgageAdvisor.com, is a one-stop mortgage financing shop that matches consumers with mortgage lenders and provides an array of online tools and information to educate potential borrowers on achieving their financing goals. Best Rate Referrals is a subsidiary of Digital Media Solutions.

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