Mortgage lender outlook posts record high in Q1, MBA doubles 2020 refinance forecast, Where Negative Equity is Concentrated, List of Loan Officers, List of Insurance Agents and List of Financial Planners
Mortgage News for 3/13/2020
Mortgage lender outlook posts record high in Q1
The profit-margin outlook for mortgage lenders hit a new survey high as strong consumer demand for mortgages continued to drive lenders' expectations of increased profitability.
Fifty-one percent of lenders believe profit margins will rise this quarter compared to the previous quarter, according to the Fannie Mae Mortgage Lender Sentiment Survey. Meanwhile, 44% think that profits will remain the same, and only 4% anticipate they will decrease.
Demand for both purchase and refinance mortgages continued to spur lenders' increased profitability outlook. Lenders cited operational efficiency as the second most common reason for the positive view.
"Lenders' expectations of consumer demand for purchase and refinance mortgages hit survey highs this quarter, with many lenders pointing to favorable interest rates as the engine driving the demand," said Doug Duncan
, senior vice president and chief economist of Fannie Mae. "The first quarter survey data, which were collected during the first two weeks of February, do not reflect the potential impact of the decline in the 10-year Treasury rate seen in recent weeks. Mortgage spreads have since widened. Given capacity constraints and continued interest rate volatility, we expect mortgage rates to continue to decline and spreads to continue to be wider throughout 2020."
Highlights of the Mortgage Lender Sentiment Survey
Mortgage spreads widened significantly in Q1 2020, consistent with mortgage lenders' optimistic outlook on profitability. In February, the primary mortgage spread (30-year FRM versus 10-year Treasury) averaged at 216 basis points, well above the long-run average of 168 basis points
For purchase mortgages, the net share of lenders reporting demand growth over the last three months posted the highest readings for any first quarter in the survey's history and since Q1 2015 for non-GSE-eligible loans
For refinances, the net share of lenders reporting demand growth over the last three months inched down from the prior quarter's survey highs but remained very strong. Meanwhile, demand growth expectations on net for the next three months for GSE-eligible and government loans hit new survey highs
The pace of credit easing remained unchanged, with most lenders reporting no major changes in their underwriting credit standards for the past three months and expected no significant changes for the next three months
"Past experience from 2012 and 2016 suggests that mortgage spreads generally take a few months to compress," Duncan said.
"We anticipate similar rate dynamics this time, depending on the path of the underlying Treasury rate. Although uncertainty around coronavirus may have a dampening effect on housing market sentiment, for now, we expect the continued low-interest-rate environment will help bolster mortgage volume, particularly refinances, as well as lender profitability, consistent with lenders' expectations."
Source: Mortgage Professional America 3/13/2020 Author: Candyd Mendoza
MBA doubles 2020 refinance forecast
The Mortgage Bankers Association (MBA) has revised its 2020 forecasts for mortgage activity and the economy, doubling its previous refinance originations projection for the year.
The massive upward revision comes courtesy of the current interest rate environment, with refi originations now expected to surge 36.7% year over year to $1.232 trillion, twice the organization’s previous forecast. That figure would represent the best refi volume since 2012, when $1.456 trillion in refinances were posted. The refinance share is now projected to grow to 47% in 2020, up from 41% last year.
As with the ongoing refi boom to date, low rates are behind the newly doubled projection. Two weeks ago, with Freddie Mac’s 30-year average at 3.45%, Black Knight reported that there were 11.1 million mortgage-holders with qualifying credit who could shed at least 0.75% off their current lien rate. With the 30-year average falling to a record low of 3.29% last week, the number of refi candidates grew to 12.8 million, the most on record.
Purchase originations are now predicted to increase to $1.377 trillion, an 8.3% gain from last year, bring total mortgage originations to around $2.609 trillion. That would be a 20.1% rise from 2019’s total volume of $2.17 trillion. It would be an impressive increase, considering that last year saw originations swell to their highest level in over a decade.
“Lower rates have led us to estimate significantly higher mortgage refinance volume, and we now anticipate an increase in refinancing in 2020, compared to the previously forecasted decline,” said Mike Fratantoni
, chief economist for the MBA.
That projected decline was initially predicated on mortgage rates starting to plateau. But with trepidation over the financial fallout from coronavirus keeping interest rates, including mortgage rates, firmly trending down, refinancing will be an attractive option for more homeowners as the year goes on.
Currently, the MBA expects mortgage rates to hover around 3.3% in the second and third quarters before inching upward to 3.4% at the end of the year. That would translate into $838 billion in mortgage originations during the typically strong second quarter buying period, with another $724 billion during the third. Combined, that’s $1.562 trillion — almost as much as the volume for all of 2018. Refinance volume for those two middle quarters is anticipated at a total of $780 billion, more than 1.8 times the volume during the same six months last year.
Source: Scotsman’s Guide 3/10/2020 Author: Arnie Aurellano
Where Negative Equity is Concentrated
Nationwide, the negative equity share for the fourth quarter of 2019 was 3.5% of all homes with a mortgage, the lowest share of homes with negative equity since the third quarter of 2009 according to CoreLogic's latest Equity Report. By state, the largest negative equity share was in Louisiana, with 9.8% of mortgages with negative equity—more than twice the national average.
Behind Louisiana, Connecticut (7.1%) and Illinois (7%) rounded out the top three states with the highest negative equity shares. States with high negative equity shares have experienced low home price appreciation. While Florida makes the top ten list for negative equity share, that state saw a large year-over-year decline in negative equity share, falling from 6.2% in the fourth quarter of 2018 to 4.8% in the fourth quarter of 2019.
Louisiana also topped ATTOM Data Solution's Q4 Home Equity & Underwater Reportlist of seriously underwater homes, with 16.8% seriously underwater. Louisiana was followed by Mississippi (16.0%, West Virginia (13.9%), Iowa (13.5%) and Arkansas (12.9%). Similarly, states with the lowest percentage of equity-rich properties were Louisiana (13.6% equity-rich), Oklahoma (14.9%), Illinois (15.3%), Arkansas (16.3%) and Alabama (16.5%).
According to CoreLogic, the amount of equity in mortgaged real estate increased by $489 billion in the fourth quarter of 2019 from the fourth quarter of 2018, an annual increase of 5.4%. Borrower equity hit a new high in the fourth quarter of 2019, and borrowers have gained over $6 trillion in equity since the end of 2011 when equity stopped declining. Years of home price increases have led to record-levels of home equity and pick up in price gains in the fourth quarter of 2019 boosted home-equity wealth further.
On the metro level, San Francisco has the largest average amount of negative equity, but the negative equity share is only 0.7%. Miami has the smallest average amount of negative equity, but has a negative equity share of 8.5%, which is more than double the national rate.
Additionally, the number of underwater properties decreased by 330,000 from the fourth quarter of 2018 to the fourth quarter of 2019.
Source: DS News 3/13/2020 Author: Seth Welborn
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