TMC Benchmark April Executive Summary: Closings Drop Back Down to Jan/Feb Levels As Refi's Continue to DeclineRead Now
There's no way to sugarcoat it; April was a tough month for The Mortgage Collaborative's national network of best-in-class mortgage lending institution members that submit data to TMC Benchmark. Closed loan units were down 15.7% from March as lenders felt the impact of significant increases in mortgage rates that started in January, but that really intensified in early March. The January increases shook a lot of potential refi customers off the fence. The March rate increases no longer made refinance viable for most. Refinances fell to a TMC Benchmark all-time low of 24% of all closings in April.
Here's the refinance share we've seen in TMC Benchmark over the last six months:
November 2021: 38%
December 2021: 34%
January 2022: 39%
February 2022: 37%
March 2022: 29%
April 2022: 24%
We also saw the % of conventional closings come in at a TMC Benchmark all-time low in April, falling to 69% (units). Government loan closings came in at 20%, and the "Other" category (all other products) rose to an all-time high of 11%.
After increasing 20% month-over-month in March, new applications fell 23% in April from the prior month. Of note, inside that number was the same trend we saw in closings, with new conventional apps falling (by %) and "Other" increasing. Conventional apps dropped to 67% in April, with "Other" rising from 10% to 12%. Government apps stayed steady by share at 21% from last month.
In April, operational efficiency waned in most areas, a byproduct of closed loan production dropping. The number of closed loan units closed per full-time processor fell from 9.2 in March to 8.3 in April, and closed loan units per full-time closer decreased from 31.0 to 28.2. In a strange anomaly, closed loan units per full-time underwriter increased to 24.4 from 19.8 the month prior. The average loan originator closed 4.3 units in April, down from 4.7 in March. LO comp came in at an average of 88.4 bps, down 5.7 bps from last month's 94.1 total.
Average annual compensation paid to operational staff was very flat month-over-month, with average annual comp paid to FTE processors coming in at $51,900 this month. Underwriter annual comp ticked up slightly to $86,800. Average annual comp paid to closers rose slightly to $54,000.
The average "app date to clear to close date" stayed identical for the third straight month at 39.6 days. Let's take a look at how this number trended throughout the course of 2021 and now into 2022:
January '21 - 47.9
February '21 - 43.1
March '21 - 42.8
April '21 - 45.7
May '21 - 43.8
June '21 - 41.8
July '21 - 43.2
August '21 - 42.5
September '21 - 42.3
October '21 - 42.6
November '21 - 41.0
December '21 - 34.0
January '22 - 40.1
February '22 - 39.6
March '22 - 39.6
April '22 - 39.6
The average cost per closed loan unit our members paid for their loan origination system (LOS) rose slightly to $131 in April. The average cost per closed loan unit for our members' point-of-sale (POS) system was up $2 to $62 in April and came in flat month-over-month at $89 for their CRM.
Average non-third party lender fees continue to trend slightly upward on conventional loans, coming in at $1,148. Government lender fees rose from $1,062 to $1,108 for this most recent month.
55% of this month's participants in TMC Benchmark were depositories, and 45% were IMBs. 39% originate under $500M a year in annual volume, 25% originate between $500M-$1B, and 36% originate over $1 billion per year in annual production.
President & Chief Operating Officer
The Mortgage Collaborative
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Hat-tip to our partners at OptiFunder for sharing Mortgage Executive Magazine’s 2022 list top mortgage companies to work for. This ranking was based on the votes of mortgage originators across the country, which included OptiFunder clients & TMC members: #42 NOVA Home Loans, #48 NJ Lenders, #64 Atlantic Coast Mortgage, #72 VanDyk Mortgage and #96 Victorian Finance.
But even more TMC members were recognized! A grand total of 36 TMC members including:
#10 New American Funding
#13 Planet Home Lending
#14 American Pacific Mortgage
#20 Academy Mortgage
#21 Prosperity Home Mortgage
#35 Pulte Mortgage
#36 Celebrity Home Loans
#37 FBC Mortgage
#40 Atlantic Bay Mortgage
#53 AnnieMac Home Loans
#54 George Mason Mortgage
#55 V.I.P. Mortgage
#56 Nations Lending
#59 Waterstone Mortgage
#61 LeaderOne Financial
#62 AmeriFirst Financial
#74 Family First Funding
#76 JMAC Lending
#78 Mountain West Financial
#79 Inlanta Mortgage
#80 Mason-McDuffie Mortgage
#81 Independent Bank
#82 Alterra Home Loans
#83 Wallick & Volk
#84 Certainty Home Loans
#85 Megastar Financial
#87 Apex Home Loans
#89 Castle & Cooke Mortgage
Join us in congratulating each TMC lender member recognized!
Earlier this week, the Biden administration released a "Housing Supply Action Plan" that strives to produce more housing supply (for buyers and renters), including affordable units, in the next five years.
There's a lot to it, and the full proposal can be found here. Some of it is pie in the sky (lots of asks of Congress), and some of it will be immediately implemented. The Mortgage Bankers Association and the National Association of Home Builders have offered their support.
Since the full plan was 19 pages long when I printed it, I put together a synopsis of it that cuts to most of the more relevant points for our 280 mortgage lending institution members nationally.
Here's the TLDR for mortgage lenders that find even my synopsis too long:
Get your Fannie and Freddie approval if you don't have them. Learn what an ADU is. Educate your leaders and staff on manufactured housing lending. And construction lending is going to be a much bigger piece of the mortgage loan pie these next couple of years. The word "construction" was used 44 times in the plan.
Big Brother is going to incent state and local governments to rezone land (allowing for more small homes) by Dangling DOT Dollars.
Department of Transportation (DOT) grant money applications from jurisdictions that allow greater housing density in zoning and land use policy will be rewarded with higher scores in the grant process, making it much more likely they'll get DOT dough.
Fannie and Freddie are going to start buying lots of manufactured homes and ADU's.
The majority of people buying new manufactured homes rely on personal property financing (chattel lending) rather than conventional mortgages. Freddie Mac is working on a "feasibility assessment" for the requirements and processes necessary to support loan purchases of personal property manufactured housing loans. If FHFA approval is obtained, Freddie Mac will purchase chattel loans to make buying those homes more affordable for Americans.
A new mortgage industry acronym! YES! ADU's – Accessory Dwelling Units. Think garage apartments, backyard homes, and in-law suites built on the land of an existing home. A number of state and local jurisdictions have changed zoning laws to allow them to help the affordable housing issue. Big Brother now wants to do its part by making it cheaper to buy them by having FHA and FHFA explore avenues to help lenders pilot and scale renovation and construction financing programs for ADU's.
FHA and HUD are going to limit institutional investors from buying homes they hold. (How was this not happening already!)
The Biden Administration's plan targets large-scale investors buying up single-family homes in low-income neighborhoods. FHA will make foreclosed REO properties available to owner-occupants and non-profits for 30 days before opening them to all bidders. And that they'll look to the direct supply of homes they own/manage to owner-occupied or non-profits that will rehab them. HUD will do the same for vacant properties it holds.
Homebuilders – we're from the government, and we're here to help with your supply and land issues.
The administration's plan says it will work with private sector companies to improve supply chain issues that hamper construction, with the goal of finishing construction on more new homes this year than in any year since 2006.
According to the plan, Fannie and Freddie Mac are working to offer forward commitment programs that would allow developers to secure financing to pay off a construction loan upon completion of construction and when the housing project has been approved for occupancy. This would help builders build homes quicker.
Fannie is also looking into the possibility of purchasing single close-Construction-to-Permanent multifamily loans, which would also foster more housing production and better supply in theory.
USDA has a construction to permanent program?
Evidently! In the months ahead, USDA will educate lenders on the benefits of the program in order to improve program utilization, increase new construction in rural areas, and address obstacles that may be limiting the use of the program.
"Congress, we need your help on these issues." Translation – don't hold your breath on any of this stuff.
In the plan, the administration urged lawmakers to pass President Biden's Unlocking Possibilities Program, which was passed last year by the House and would establish a new $1.75 billion grant program through the Department of Housing and Urban Development (HUD).
Biden's $1.75 trillion Build Back Better spending plan proposed $150 billion for the construction and rehab of more than 1 million affordably priced rental units and single-family homes. The plan died in Congress in December, and now it pleads for passage.
The White House also urged lawmakers to pass Biden's 2023 budget request, which includes a proposal for $10 billion in HUD grants to increase accessibility to affordable housing and subsidies to strengthen the Low-Income Housing Tax Credit.
The plan also asks Congress to pass a number of bills that would build the pipeline of home construction workers through comprehensive immigration reform and the creation of apprenticeship programs.
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