The Wall Street Journal recently reported that there is a significant overcapacity in the mortgage lending industry. Why does this matter to you? Well, there are a few reasons. If you are buying a home, it is a good time to be able to get a mortgage – and to perhaps negotiate slightly lower fees. However, if you are considering a refinance – caveat emptor (buyer beware).
One of the first things that lenders do when their volume of loans declines and they have excess capacity, is to ramp up advertising. So, you may be hearing ads that offer “no fees”, “no appraisal fee”, or “no closing costs”. Some of these may be bona fide offers – but some may just be hype that ends up in these charges being added to your loan amount or to your new interest rate.
One of the next things that lenders may do is to advertise suggestions for what you might do with the equity in your home that may have grown due to the recent increases in home values and the continuing investment you have made in it by making your mortgage payments or home improvements. Your home equity is the current market value of the property minus the mortgage owed and minus sales commissions and other costs that you would incur in a sale.
Your home is an investment that offers the opportunity to accrue wealth as the value increases and you pay down the amount owed on the mortgage. For the sake of discussion, your home is not your new RV, motorcycle, boat or next vacation. Your home is not your bank. There is no question that borrowing against your home equity to cover a major medical expense or other major emergency may make sense – and it may make sense to use home equity to facilitate another long-term investment – like a college education for children or grandchildren. But just consider this: taking out a 15 to 30 year term mortgage to finance a short term purchase or event is rarely a smart choice. By the same token, using home equity to pay off accumulated credit card or other short-term debt to get a lower interest rate on it generally only makes sense if you have a budget and a commitment to a plan to avoid incurring new debt – and you can afford the potentially higher payment on your mortgage.
Just a quick word on reverse mortgages: These complex financial instruments can provide real value and benefit to older homeowners and their family when home equity can help to cover expenses and allow the borrowers to remain in their home. However, again, your home is not your bank. The reverse mortgage is not for everyone and requires consultation with trusted family members and/or financial professionals.
How to make a good decision about borrowing using your home equity? First, be sure to understand whether the person or entity providing advice to you has a vested-interest in making a loan to you. If s/he will earn a commission or other incentive from making a loan to you, sadly, your best interest may not be their first priority. Second, ask your loan officer or the lender to provide a net tangible benefit analysis. This will show you how much the costs of the transaction and the increased loan amount, if applicable, will cost you and how long it will take you to “break even”. Many states require this when you are doing a refinance – and many lenders routinely provide it even if it is not required. If your lender does not offer it – or cannot provide it upon request – it might be in your best interest to find another lender. Finally, remember that for most of us, our home is our largest asset and is our best investment for accumulating wealth. So, use extreme caution when you hear the enticing ads offering you a new loan. The lender who has excess lending capacity or the loan officer working desperately for another commission may not have your financial interest as their priority. Your home is your home. Consider and protect it as such – listen carefully to ads and take steps to ensure that undertaking a major borrowing against your home will be beneficial to you and your family. You may also want to seek pre-purchase or financial counseling from a non-profit organization that specializes in giving homeowners this type of advice. You can look for resources in your area at HUD Approved Housing Counselors.
TMC members can sign up today and start experiencing the benefits of AHA membership. Register here and use code tmc2017.
For more information on the benefits of AHA membership, contact Rod Luckhart.
There's no denying that 2017 was a tough year for originations, so making a list of top originators is no small task. That's what makes it all the more impressive that 66 originators from 21 of our lender members made the Scotsman Guide 2017 Top Originators list with top dollar volumes! Kudos to everyone in our network who made the list:
Congratulations on a job well done!
View the entire list here.
TMC is pleased to share some recent industry insights from preferred partner NAHREP Consulting on lending disparity in today's mortgage market:
"Mortgage and real estate professionals should always keep top of mind that owning a home remains the most reliable way for American families to build wealth and is often financially better than renting,” said Maria Vergara, the President of NAHREP Consulting Services. “But access to homeownership is not equal. Hispanic and black households still have lower homeownership rates than non-Hispanic white households. The gap is getting narrower, but still needs to be addressed. Many factors contribute to this disparity and understanding their impacts can be difficult. There is new research from the Urban Institute and Sloan Foundation's Administrative Data Research Facility that shows a considerable gap in homeownership rates between neighborhoods with low levels of limited English proficient (LEP) residents and those with higher levels of LEP residents.”
"The report said, among other things, 'If we control for other factors that influence homeownership (e.g., income, age, and race), neighborhoods with the highest concentrations of LEP residents have homeownership rates 5 percentage points lower than rates in neighborhoods with the median concentration of LEP residents. Limited English proficiency has a considerable impact on homeownership rates.' This research establishes that it is a barrier on top of other, more researched barriers. This finding suggests that we might expand homeownership by better serving the LEP community.”
NAHREP Consulting Services can assist in bridging the gap to reach the LEP community with such services including, Translation and Cultural Adaptation, Translation Services, Cultural Competency Training and Hispanic Marketing Fundamentals
For more information on NAHREP Consulting and the effective tools they are empowering lenders across America with to best serve the Hispanic housing marketplace, contact Maria Vergara at 619.922.7553.
COMPLIANCE HOT TOPIC
I understand the CFPB revised the servicing requirements for borrowers in bankruptcy. What do I need to know about these changes?
The CFPB revised the rule for Bankruptcy Periodic Statements, effective April 19, 2018. It applies to all entities that own and/or service consumer first lien mortgage loans, except for small servicers of 5,000 or fewer consumer mortgages.
Unless an exemption applies, a servicer must provide periodic statements or coupon books to a borrower when the borrower is in bankruptcy. Servicers must modify these periodic statements or coupon books for the bankruptcy. Modifications depend on the type of bankruptcy filed. In certain circumstances, once the borrower exits bankruptcy or the bankruptcy no longer applies to the borrower, a servicer can then transition back to providing an unmodified periodic statement or coupon book.
A servicer may be exempt from providing coupon books if a borrower is a debtor in bankruptcy or has discharged or discharged personal liability for the mortgage loan through bankruptcy.
Further, servicers are not required to send periodic statements or coupon books to borrowers in bankruptcy when the following two requirements are satisfied:
With some exceptions, periodic statements or coupon books for borrowers in bankruptcy must contain the same categories of disclosures as are provided to borrowers who are not in bankruptcy. Variations exist in regard to how “amount due” must be displayed, as well as how delinquency information and other account information must be disclosed. The periodic statement must include the discharged status of the loan or the borrower’s status as a debtor in bankruptcy, and a statement that the periodic statement is being provided to the borrower for informational purposes only.
To learn more about how MQMR is bridging the gap between Risk & Compliance:
TMC is pleased to share some of the latest findings from our friends at Fannie Mae surrounding millennials and their impact on the mortgage market:
The millennial generation now encompasses the 25–34 age range that – in generations past – has accounted for a large portion of first-time home buyers. And being 88 million strong, millennials have the potential to make a huge impact on the housing market. But despite their impressive numbers, their effect on the market has been muted.
A combination of growing student loan debt and the Great Recession undoubtedly slowed young adults’ initial ascent into homeownership. But with the economy in recovery mode for nearly a decade, when are millennials going to start moving into homes of their own?
Turns out, they might already be headed in that direction.
In a November study about millennials and their increasing homeownership demand, researchers from the University of Southern California and Fannie Mae used two different approaches to analyze recent data from the Census Bureau’s American Community Survey (ACS). When they compared the results of the two analytical approaches, they found two very different views on the state of millennial homeownership.
On the one hand…
Young people today have lower homeownership rates than before the Great Recession
When you compare millennials today with 25- to 34- year-olds prior to the Great Recession, data show that today’s young people have lower homeownership rates. Popular perceptions of millennials and homeownership have been shaped by this more traditional analytical approach that compares like age groups at different points in time, which the study calls the “age-group approach.” Using this approach with the ACS data revealed no rebound in homeownership rates, despite nearly 10 years of economic recovery since the Great Recession.
Many economists are concerned by the potential consequences of a generation that can’t afford – or simply chooses not – to purchase homes. First, a lower homeownership rate among millennials reinforces the belief that homeownership demand will stay low indefinitely. Second, the lack of interest could suggest that millennials’ homeownership preferences are fundamentally different from previous generations’ – which could mean the housing industry must prepare for a big change.
On the other hand…
Millennials are now buying at a more rapid pace than a few years ago
However, when examining the pace at which millennials are buying homes, data revealed a sharp awakening of millennial homeownership demand. This alternative method of data analysis, called “cohort analysis,” allowed the researchers to separate today’s young homebuyers’ behaviors from previous generations’ and focus on incremental changes in the homeownership rate as members of a cohort (i.e., a group of people born during the same period) grow older.
Using this method, researchers found a sharp increase in the pace of millennial homeownership attainment. For example, the cohort moving from the 28–29 age group in 2014 into the 30–31 age group in 2016 increased its homeownership rate by nearly 6 percentage points, a substantially larger gain than experienced by earlier cohorts traversing the same age range during the recession. In fact, for every age group above 25, cohorts’ homeownership rate gains between 2014 and 2016 were significantly greater than during the economic recession and housing bust. Compared with the age-group approach, the cohort approach has a more optimistic outlook for millennial homeownership demand and casts doubt on the notion that young adults will have an eternally suppressed preference for home buying.
Hear from the authors of the study – Patrick Simmons, Fannie Mae Director of Strategic Planning, and Dowell Myers, Professor of Policy, Planning and Demography at the University of Southern California – in their Perspectives blog. And stay tuned for additional exploration of the Millennial homeownership rebound, including an investigation on the roles of housing supply and other factors in shaping regional variations in the pace of recovery.
We call the vendors in our network preferred partners for a reason and here's another reason why. Our friends at FundingShield are currently offering our lender members a Spring Savings Special! Learn more about how they can help you decrease fraud, reduce risk and save money!
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We've said it before, we'll say it again and we'll keep saying it because it's true - The Mortgage Collaborative's members are some of the best and brightest in the industry! And, now we have even more proof to back us up. 18 of our members have been honored with a place on HousingWire's 2018 Tech 100 list.
Congratulations from the entire TMC team! We look forward to seeing the innovation you'll bring to the mortgage industry next.
Lender Member Winners
Check out the entire list here.
TMC - Chief Operating Officer