Citi Mortgage appears to be expanding their wholesale market-share for mortgage lending. The residential mortgage lending arm of Citicorp funded $18.6 billion of one- to four-family mortgages in the third quarter, an impressive 66% gain from the prior period, according to figures released Monday morning. Compared to the same quarter a year ago, loan production by CitiMortgage rose 56%. According to Mortgage News, Citi Mortgage is once again expanding their market-share in wholesale mortgage lending.
Although its loan production results were impressive, it appears that Citi is continuing to mark down the value of its mortgage loan refinancing and servicing rights. At September 30, its MSRs carried an asset value of $3.9 billion, compared to $6.2 billion a year ago, a decline of 36%. According to Colorado lender, Shawn Downs, “Citi has always been an agressive wholesale lender that lenders and brokers like to work with because their loan processing is efficient and the compensation has been good.”
Regarding home foreclosures, company chief financial officer John Gerspach said the bank has found no issues with the way its home loan servicing operation processes foreclosures, indicating it has no plans to follow other large banks in suspending foreclosure sales pending a review of their practices. Gerspach said Citi has reviewed its procedures, calling them “sound.” He made the comments during a conference call with reporters to discuss the bank’s third-quarter earnings. Meanwhile, Citigroup continues to whittle down the residential holdings of its affiliate, Citi Holdings. That unit had residential real estate holdings of $136 billion at Sept. 30, a 14% decline from a year ago. But delinquencies in Citi Holdings rose slightly to 4.78%.
Today, most mortgage brokers that have less to spend so it is imperative that they buy leads cautiously. Internet mortgage leads can be a very cost effective form of marketing if you know how to purchase leads from lead generation companies. Be careful of how and where you purchase leads. Ask the account executive at the lead company what their minimums are and be cautious when buying leads in bulk. If a lead company is generating 50 leads a day and 15 leads a day that meet your filters, you have to wonder how a lead company could send you 250 leads in a 3-day span. Clearly these are either old or brokered leads. In a recent article, Bryan Dornan the founder of mortgage lead generation company, the Lead Planet reminded mortgage companies to “Consider more than just the cost per lead.” Dornan suggests that “the cost per funding is the bottom line.” See the original mortgage lead buying post at the Mortgage Lead Vault > Cost to Funding Ratio Matters with Mortgage Leads
The recent mortgage meltdown caused jumbo mortgage rates to soar and the availability for non-conformning loans shrunk significantly. However signs are indicating that jumbo rates are declining and lenders are more willing to make loans that top the limits for Freddie Mac, Fannie Mae and the FHA.
Phil Kelly had 18 more months to go before the fixed rate on his $2.5-million mortgage became adjustable. But when Kelly, a former computer executive living in Rancho Santa Fe, learned he could knock his interest rate down by a full percentage point by mortgage refinancing, he went for it. “It’s always tough to pick the exact bottom or top of anything,” Kelly said. “But I think this rate is about as low as you’re going to get.” For most California borrowers, jumbo mortgage refinance options have been few and far between.
Jumbo Mortgage Rates: For home loans greater than $729,750 in counties with the highest-cost housing — shot up during the financial crisis as lenders and loan investors shunned anything tainted with even a whiff of higher risk. Rates on big mortgages were especially high relative to those on smaller loans. But in a boon for borrowers in California’s expensive housing markets, the jumbo-home loan market is starting to return to normal.
According to rate tracker Informa Research, two weeks ago, the average interest rate on 30-year fixed-rate jumbos dropped to 5.79%, a nearly five-year low, Services of Calabasas. It edged up to 5.88% on Tuesday, still very attractive by historical standards. The average has dropped from the 7% in late 2008. Today, fewer borrowers qualify for jumbo home mortgage loans, because stated income loans have disappeared.
Jumbo rates are even lower on hybrid adjustable mortgage loans. With these hybrid ARM’s, the interest rate is fixed for three, five, seven or ten years before it becomes an adjustable rate loan. (ie. 3/1, 5/1, 7/12, 10/1 ARM)
Banks are also relaxing slightly some of their requirements for jumbo mortgage loans. That’s an encouraging sign because the market for jumbos, in contrast with the rest of the mortgage business, isn’t being supported by government backed bonds. Unfortunately million dollar home loans are not supported by the Obama Administration.
The lower jumbo mortgage rates and somewhat easier terms reflect newfound confidence among banks in the housing market. That’s because, jumbos loans exceed the maximum loan amounts that Freddie Mac and Fannie Mae have agreed to insure. In addition, the private market for mortgage-backed bonds dried up when the meltdown hit. So mortgage lenders offering jumbo mortgage loans in today’s market are willing to take the risk of servicing them in their portfolios.
The maximum amounts for Freddie Mac and Fannie Mae “conforming” mortgages, and for FHA mortgages, are set by Congress. The cutoff for single-family homes was $417,000 from 2006 until February 2008, when lawmakers increased it temporarily to $729,750 in certain high-cost areas, including Los Angeles, Orange and Ventura counties. Conforming loans top out at $500,000 in Riverside and San Bernardino counties and $697,500 in San Diego County.
The increased upper limits, which have been extended until the end of this year, have created a three-tier system in expensive areas, mortgage professionals say: loans of up to $417,000, which are the easiest to obtain and carry the lowest rates; “conforming jumbos” from $417,000 to $729,750, which are somewhat harder to get and have slightly higher rates; and true jumbos, with the toughest standards and highest rates.
In the boom years of 2005 and 2006, jumbo mortgage rates were typically no more than a quarter of a percentage point higher on jumbo loans than on conforming loans, according to Informa Research. That widened as the mortgage meltdown intensified and home prices dropped in late 2007. The spread ballooned to nearly 1.7 percentage points in early 2009 after the entire credit system froze.
But this year the rate spread has narrowed to less than a percentage point. It could shrink more if conforming-loan rates rise as expected after the Federal Reserve wraps up a $1-trillion-plus program to support the market for conforming loans next month.
In addition to lower rates, down-payment requirements are being relaxed in some cases. For example, to write a jumbo loan in coastal areas of Los Angeles and Orange counties, Wells Fargo Home Mortgage looks for a 20% down payment or that percentage of equity, down from 25% last year, said Brad Blackwell, a national mortgage sales manager at the lender.
The reason: Wells believes high-end home prices are stabilizing in those coastal counties. But the bank still requires higher down payments in the Inland Empire and other battered housing markets such as Florida, Nevada and Arizona, where prices for jumbo-size homes don’t appear to be stabilizing, he said.
Jumbo loans remain much harder to get than before the credit crunch and recession. Borrowers typically must have a credit score of at least 700, compared with boom-era minimums in the 600s, though Laguna Niguel mortgage broker Jeff Lazerson said at least one lender was again making sub-700 jumbos available.
What’s more, unless their down payments are very large, borrowers must provide evidence of high income, have sizable bank accounts as a cushion against the unforeseen and occupy the houses themselves.
But there are clear signs that the jumbo market has loosened. One is an increasing availability of “stated income” loans — those that don’t require proof of income — of as much as $2 million to borrowers with at least a 40% down payment, said mortgage broker Gary Bluman, owner of Real Estate Resources in Brentwood.
Also, instead of a true jumbo loan, some “piggyback” second mortgage loans are available again to help certain borrowers with 25% down payments pay for high-priced homes, Lazerson said.
Of course, adjustable, stated-income and piggyback loans were big contributors to the mortgage meltdown. But such provisions are less risky if a borrower has 25% to 40% equity. Despite the confidence in the market that such terms imply, lenders and mortgage investors are still dealing with piles of bad jumbos made during the boom.
Delinquencies of 60 days or more on prime jumbo loans that were packaged into securities jumped to 9.6% in January, up from 3.7% a year earlier, Fitch Ratings reported this month. The jumbo delinquency rate in California climbed to 11.3% from 4.1% a year earlier.
For now, the jumbo market remains limited to the volume of loans that banks are willing and able to keep on their books. But there is hope for a return to private outside funding. Although no jumbo loans have been turned into securities for at least two years, packages of delinquent jumbos have begun to be sold again to “vulture” investors, a sign that the secondary market for the home loans may revive, said Michael Fratantoni, vice president of research at the Mortgage Bankers Assn. “The ice sheet,” he said, “is starting to crack here and there.”
According to data released by the Commerce Department’s Census Bureau and the Department of Housing and Urban Development, the expansion to the homebuyer tax credit, an exceptional government stimulus measure was passed to boost housing activity, new home sales took a 7.6% decline in December. The results come on the heels of National Association of Realtors (NAR) reports of similar December declines in existing home sales. First time home buyer loans have seen a recent spike in loan application volumes since the tax credit news hit the street.
The homebuyer tax credit extended for first time homebuyers and expanded to include existing homeowners requires buyers have a contract in place by April 30 athnd close by June 30th. The problem, homebuilder insiders and real estate agents tell HousingWire, is that consumers who tried to take advantage of the tax credit too late in the fall before realizing there wasn’t enough time to close a deal by the original November 30th expiration date have yet to reengage themselves in the home loan process. FHA mortgage lending continues to support a majority of the first time homebuyer loans. “With new homes, the homebuilders ran out of everything they could close by the end of November,” Burns said. “There were people that wanted to buy in these communities that didn’t because they couldn’t close in time.”
As HousingWire previously reported, the JBREC December monthly builder survey showed optimism among 264 home building industry executives from public and private companies. The belief that builders will have increased community count, better orders and slightly higher prices has 57% of respondents planning for more revenue in 2010 than in 2009.
Another confidence booster is the tax credit many builders are receiving from the temporary extension of the terms of net operating carry-back laws, which let builder recoup losses from taxes paid in profitable years. “It’s given them more confidence in their cash balances and they want to start more speculative homes because of the extra cash that they now have,” Burns said.
The average mortgage rate on a 30-year home loan with fixed rates climbed to 5.02% last week from 5%, MBA said. The mortgage rate reached 4.61% at the end of March, the lowest since the group’s records began in 1990. At the current thirty-year mortgage rate, monthly borrowing costs for each $100,000 of a home loan would be $538.04 which is about $12 less than a year ago when the rate was 5.22%.
A report later today may show sales of new homes rose 3% in December to a 366,000 annual rate, according to the median projection in a Bloomberg News survey. Sales of existing U.S. homes plunged last month, reflecting the expected expiration of the government’s first-time buyer tax credit on November 30th.
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The average rate on a 15-year fixed mortgage rose to 4.34% from 4.33 % a week earlier. The rate on a one-year adjustable mortgage increased to 6.84% last week. The share of applicants seeking to refinance a loan dropped to 67.6% last week, the lowest level in almost three months, from 71.7% the prior week.
Mortgage lenders continue to see muted demand for financing. “The residential mortgage and home equity line portfolios also continued their downward trend,” SunTrust Banks Inc. Chief Financial Officer Mark Chancy said on a conference call January 22nd. The Atlanta-based lender said it lost $248.1 million in the fourth quarter as loans soured in the Southeast real estate market. The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail mortgage loan originations.
FHA announced they will continue to allow borrowers to finance the upfront mortgage insurance premiums. FHA will pursue legislative authority to allow flexibility to bring the annual premium, which borrowers pay on a monthly basis, higher. Also, seller concessions will be reduced to 3% from 6%. In a recent blog post, the FHA Mortgage Lending Blog stated that the Administration will expand mortgage refinance guidelines sometime in 2010.
Frank Black, who managed a Wells Fargo branch in California said, “After reviewing the changes to the FHA requirements, I believe FHA mortgage lenders will agree that the new rules make sense and are needed to keep the government financing alive. A few years ago, many brokers and lenders took advantage of FHA underwriting by pushing the envelope with risky home loans.” See the original article > FHA Loan Guidelines Require 10% Down for Low Fico.
The home mortgage industry added 200 full-time employees to their payrolls in November, the first jump in industry employment since July. The U.S. Bureau of Labor Statistics reported that employment in the mortgage broker/ bankersector rose to 255,700, compared to 255,500 in October. The BLS data shows the increase is entirely due to more mortgage brokers having jobs. Employment at mortgage broker and banking firms was flat in November. Overall, the home loan industry experienced a 10% drop in its workforce over the past 12 months. Major mortgage lenders have relied on outsourcing and temporary workers to deal with fluctuating demand. Meanwhile, the nation’s unemployment rate held steady at 10% in December, but 85,000 workers were laid off, according to the new jobs report. This disappointed analysts who were looking for a sign that the job market had finally turned the corner.
Slowly rising mortgage interest rates along with relatively sluggish home sales will have repercussions in the mortgage industry over the next few quarters according to the Mortgage Bankers Associations Mortgage Finance Forecast for the Fourth Quarter of 2009. “The most important factor driving recent declines in real estate market activity and increases in home loan delinquencies and foreclosures has been the ongoing job losses and rising unemployment rates stemming from the most severe recession the country has experienced in a generation.
Current mortgage interest rates, home prices, and household incomes all impact affordability. Today, mortgage rates remain near record lows, and with the continued decline in home prices, for those with resources, it is a buyers’ market like we haven’t seen in years. Obviously, the problem is that there are not enough potential homebuyers who have the income and down-payment, and who feel confident both that the housing market will recover, and that their job situation is secure, to boost demand despite the improvements in affordability.”
MBA economists expect long term mortgage interest rates to raise slowly from the average of 4.9 % expected for the fourth quarter to 5.2% in the first quarter of 2010 and 5.7% in the fourth quarter.Rates will climb to 6.0% during the second quarter of 2011.One year adjustable rates are projected to be almost completely flat over the next year.At 4.6% this quarter, they will trade between 4.7 and 4.8% throughout 2010 and rise to an average of 5.3% in 2011.At the same time, sales of existing homes, estimated at nearly 5 million this year will continue at that pace through the first three quarters of 2010 before increasing in the fourth quarter for total of 5.55 million sales for that year.Sales are expected to reach 6 million in 2011.New home sales, projected to reach an estimated annualized rate of 442,000 in the fourth quarter and 391,000 for the year will move around in a narrow annualized range of 468,000 to 508,000 during the four quarters of 2010 and finish the year with around 483,000 sales. New home sales will total 609,000 in 2011.All of the above outlined circumstances are expected to result in a slow year for home mortgage originators with home loan originations increasing but not strongly enough to make up for a plunge in home refinancing.It is expected that purchase mortgages will total 718,000 for this year; 804,000 in 2010 and 896,000 in 2011.FHA refinance activity is forecasted to be strong, even though HUD recently announced new FHA mortgage lending revisions.
During the fourth quarter it is expected that 238,000 households will seek refinance loans.This will be the slowest quarter of the year, down substantially from the 426,000 transactions in the second quarter and 296,000 in the third.The estimate for the entire year is 1,246,000 mortgage refinance loans.However, next year with interest rates up and much of the demand for refinancing wrung out of the system the number of refinances is expected to plummet to little more than half the 2009 number; 2010 will be even worse.Refinancing in the first quarter of 2010 will be 175,000 units compared to 287,000 during the first quarter of this year and the total in Q4 will be 140,000 compared to 238,000 this quarter.MBA is projecting a total of 693,000 refinances in 2010 is estimated at 693,000 and in 2011 the total will be 591,000.
Fannie Mae provides several refinance options including the Home Affordable Refinance Program.Fannie Mae refinance solutions are only available eligible borrowers who have a mortgage balance less than $417,000 that is owned by Fannie Mae.125 mortgage options are available for no equity home refinancing.
Fannie Mae Refinance Plus simplifies the refinancing process for loans that are already in a mortgage lender’s servicing portfolio. This Fannie Mae mortgage program allows refinancing to 125% LTV. The Home Affordable Refinance Programs offers a unique refinance alternative because no equity is required.Fannie Mae pledges to provide home refinancing with increased efficiencies for the origination and underwriting of Fannie Mae.Fannie Mae allows limited cash-out refinance transactions up to 125 percent loan to value.
Steve Park of Mortgage Brokers Network was asked about Encompass and this is what he had to say. “Encompass certainly has made a dent in the loan origination software market that Calyx’s Point has dominated for so long.”Lead Planet, a mortgage lead generation company have confirmed a surge in Encompass users with their lead buying clients. “We’ve been using Encompass very successfully for quite some time, and this integration has made it exponentially easier for us to access what we feel is the most accurate product and pricing information available on the market,” says Craig Willis, chief technology officer for Amerifirst Financial, an Encompass and Mortgage Pricing Systems user. Read the complete article > Mortgage Lead Companies See Rise Encompass Use for Mortgage Management Solutions
New hirings at mortgage companies in the United States outpaced layoffs by more than 8,000 in 2nd Quarter according to a recent report outlining employment analysis. One mortgage company had more impact on mortgage employment than any other.
Mortgage lenders laid off 3,229 employees between April 1 and June 30, according to the analysis. Layoffs were about 71 percent fewer than in the first quarter and 31 below the same period last year. “The latest period reflected consolidation as a result of several high-profile mergers during the past year,” MortgageDaily.com Founder and Publisher Sam Garcia explained. “Much of the layoff activity was concentrated at financial institutions.”
Mortgage rates in the U.S. fell to the lowest since May as mortgage refinance loans surged on reduced borrowing costs. The average thirty-year rate fell to 5.14% from 5.20%, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The fifteen-year mortgage rate was 4.63%.“It’s been stuck in this low-five range for a number of weeks,” Donald Rissmiller, chief economist at New York-based Strategas Research Partners, said. “This is still a good interest rate.”
The Mortgage Bankers Association’s index of home loan applications rose 4.3% to 514.4 in the week ended July 10. Purchase applications fell 9.4 % while requests to refinance gained 18%, indicating prospective buyers are still wary of falling home prices while property owners are taking advantage of low rates to reduce their monthly payments. Kelly Media Group Founder, Jason Cardiff of the Mortgage Lead Company, said, “The result of lenders cutting fees will trickle down to homeowners and eventually provide a hedge against inflation for the rest of 2009.”
Federal Reserve Chairman Ben S. Bernanke is trying to reduce lending costs with a $1.25 trillion program to purchase securities backed by home loans. According to data compiled by Bloomberg, the worldwide credit crunch spurred by bad credit mortgages has cost the world’s financial firms almost $1.5 trillion in losses and more asset write-downs.
Last month, the Federal Reserve left the size of its buying program intact and kept the benchmark rate for federal funds at between 0 and 0.25 %. The rate will stay at “exceptionally low rate levels” for an “extended period,” the Federal Open Market Committee said in a statement June 24th.“We’re going to see more of the same out of the Fed,” Rissmiller said. “They’ve been happy with what’s happened.”
April’s Record Low
Mortgage rates reached a record low 4.78 % twice in April after the central bank announced its plan to boost buying of both mortgage securities and Treasuries.Those purchases brought down yields on government debt and mortgage-backed bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae, allowing lenders to reduce mortgage rates on new home loans and still sell the securities at a profit. Home loan rates started climbing in May along with Treasury yields on investor concern that ballooning government debt would fuel inflation.
