Report: 15M Americans Could Stop Paying Home Loans

The Cheif Economist at Moody's Analytics estimates that as many as 30% of Americans with home loans—nearly 15 million households—could stop paying their loans if the economy is closed through the summer.

“This is an unprecedented event,” said Susan Wachter

,professor of real estate and finance at the Wharton School of the University of Pennsylvania, in an article by the Los Angeles Times.

“The great financial crisis happened over a number of years. This is happening in a matter of months—a matter of weeks.”

Andrew Jakabovics, a former senior advisor for the U.S. Department of Housing and Urban Development and who is now at Enterprise Community Partners, a nonprofit affordable housing group, said of the virus, “nobody has any sense of how long this might last.”

“The forbearance program allows everybody to press pause on their current circumstances and take a deep breath. Then we can look at what the world might look like in six or 12 months from now and plan for that,” Jakabovics told the Los Angeles Times.

CNBC reported Monday that a coalition of mortgage leaders sent a request to Federal regulators over the weekend for

“desperately needed cash.”

The report from CNBC said the number for mortgage forbearance requests have been coming in at an

“alarming rate,”

but servicers still need to pay bondholders.

The report cited Jay Bray, CEO of Mr. Cooper, who said his company has already granted 80,000 forbearances. Mr. Cooper services nearly 4 million loans across the nation.

CNBC quoted Bray as saying,

“there is going to be complete chaos”

without federal help.

According to CNN, analysts believe the Fed will step in soon, as after granting homeowners forbearance, servicers are still on the hook with investors to continue paying principal and interest on the mortgages, leading to servicers lacking the cash necessary to cover missed payments.

To address these concerns, and to introduce ways to mitigate the unintended consequences of moratoriums, the National Mortgage Servicing Association (NMSA), a nonpartisan organization driven by senior executive representation from the nation’s leading mortgage servicing organizations, announced a proposal to ensure that the up to $100 billion in liquidity necessary to provide payment relief for up to 12 million Ginnie Mae homeowners is secured.

The NMSA released a proposal outlining their recommended steps in the light of some of these announced governmental programs.

NMSA’s proposal outlines how Ginnie Mae programs, which include residential mortgage loans guaranteed by FHA, VA, and USDA, play a crucial role in the housing market by serving low-to-moderate income, communities of color, first-time homebuyers, and rural and veteran mortgage borrowers who typically do not qualify for conforming or bank loans and may be especially vulnerable during periods of economic stress, including the present COVID-19 pandemic.

Source: MReport 4/6/2020 Author: Mike Albanese

ClosingCorp streamlines management of settlement services

Automation brings down time and cost of each loan

HousingWire sat down with ClosingCorp CEO Bob Jennings to discuss the company’s recent acquisition of WESTvm ordering technology.

HousingWire: What are the benefits of leveraging automation in the origination process?

Bob Jennings: At the most basic level, the benefits are saving time and money, and eliminating errors. Think about how many documents have to be handled and how many manual entries go into the origination process.

Our approach to automation is simple: Shorten the process one keystroke at a time. But when you apply that to a lender that’s processing around 2,000 loans per month, you’re eliminating hundreds of thousands of keystrokes, which probably translates into an hour or so off of each loan and that adds up.

At ClosingCorp our focus, of course, is estimating, ordering and delivering settlement services like title, flood, appraisals, etc. Done manually, these activities take time and create an opportunity for human errors.

Our Order Management solution allows the lender to allocate all vendors based on their specific rules and relationships. For example, they can select their vendors of choice by product, loan type, branch and state.

Once the integration with our API is in place and the allocation is done, when a milestone is hit in the lender’s loan origination system it will automatically send the order to the right vendor. The response – for example an appraisal, flood cert or a title order – then is automatically routed back into the LOS and an eFolder.

So instead of entering and re-entering data, we’ve automated these processes. So, you select what you need, click the button once and these critical services and products are ordered and delivered into the appropriate eFolder.

HW: How does the ordering technology solution recently acquired from WEST fit in with ClosingCorp products?

BJ: In a sense, it’s a perfect marriage of two very complementary solutions. The original ClosingCorp fee service connects to a network of more than 20,000 vendors nationwide and generates accurate, real-time fees and closing data.

Our solution, which has been renamed ClosingCorp Order Management, is a single, web-based portal that enables automated ordering of the same products and services that ClosingCorp estimates.

The combination creates the first loan-centric ordering technology available in the market and significantly streamlines the ordering and management of critical settlement services needed to originate or service a loan. It allows lenders to order appraisals, flood certifications, title and closing services and documents in less than 60 seconds.

Let’s consider a couple of examples to illustrate how well this works with the WESTvm and ClosingCorp integration.

First, every loan starts by setting up the disclosures in the loan file. If you can’t set up those disclosures accurately, precisely and instantaneously, lenders would have to re-disclose. With the combined integration, the disclosures are created up front with automated ordering, retrieval, and posting into the LOS.

Second, we are dramatically reducing the amount of phone calls and emails required to collaborate with service providers and lenders. Now it’s really only happening when it’s needed. Our goal is to never have service providers and lenders email, which happens in a non-secure environment.

All the docs come into our system automatically and flow right into their LOS, to their folder of choice. For example, if there are questions to the title provider, they’re inside of our portal. And when they go to the title notes of that loan, that note gets directly sent and integrated back to that vendor’s integration. All the collaboration and communication is stored in one portal.

This combined Order Management system is available through the Ellie Mae Encompass Digital Lending Platform and ClosingCorp’s standalone web portals. We are also working on several other third-party integrations.

HW: How does the ClosingCorp Order Management system ­help lenders drive down costs and time of loan origination?

BJ: We do this several ways. Because our solution isn’t reliant on a self-maintained database of fees and taxes, we eliminate misquotes and the need to re-disclosure loan costs. Inaccurate or excessive fees can create compliance and write-off issues and our solution significantly reduces these occurrences.

As I mentioned earlier, manual ordering adds time and cost that we eliminate. ClosingCorp’s tagline is “make every second count,” and time studies conducted on clients using our ordering platform show them doing just that, saving on average 45 minutes per file and $25 to $45 per loan.

At 2,000 loans per month, monthly savings could range between $50,000 and $90,000 –potentially $600,000 to $1 million annually. That savings directly translates into increasing the productivity of the processor.

Workflow efficiency also benefits lenders (and vendors). With an individualized status page, they can manage and view the workflow of all of their loans and all open orders, with the ability to instantly look at the detail, seeing everything in plain English and having visual confirmation. The Order Management status page provides a totally secure environment with one location and one portal.

HW: How do ClosingCorp’s solutions improve the borrower experience?

BJ: The end game for all fintech providers is to enhance the ultimate borrower experience. ClosingCorp delivers on this from several perspectives.

Delivering accurate, data-rich Loan Estimates minimizes borrower “surprise” upfront and at closing. Our solutions also help protect borrowers and lenders from TRID-related errors and re-disclosures which often make the borrower uneasy and confused.

Our solutions improve the relationship between lenders and vendors and help create borrower collaboration and confidence as they go through the origination process.

Source: HousingWire 2/26/2020 Author: Content Solutions Team

A Sluggish Pace

The Mortgage Industry Should Expect Fallout With Americans Moving At Record-Low Numbers

Loading up the U-Haul to cross the country or head to a neighboring city in pursuit of one’s dreams of a better life, an education, a new job or a bigger house still happens. It’s just not as common as it once was.

In fact, only 9.8% of the American population ages 1 and older changed addresses last year, according to the U.S. Census Bureau. That is the smallest share on record dating back to 1948 and has potentially wide-ranging implications for loan originators, property investors, home sellers, real estate agents and others connected to the mortgage and housing industries. For single-family rental (SFR) investors, for example, this trend could mean more stability for their rental properties, which is good news. It also could mean less turnover of inventory, a challenge in today’s market for investors who want to expand their rental-property portfolios.

KEY POINTS

The U.S. population is moving less frequently For the first time on record, less than 10% of Americans changed homes in 2019.

Depending on other factors, this could result in fewer mortgage originations.

In the majority of the most populous U.S. counties, renting is more affordable than buying a home.

Telecommuting is allowing more people to work from anywhere, rather than move.

Various factors are causing millennials and baby boomers to stay in place.

This trend could have mixed results for the single-family rental investor market.

For mortgage originators, declining mobility could translate into less demand for mortgages and fewer loan originations over each potential borrower’s lifetime. That could occur if new household formations and population growth doesn’t make up the difference.

Declining mobility

From the 1950s through most of the 1960s, roughly 20% of the U.S. population moved to a new home each year, according to census figures. The annual mobility figure dipped below 20% in the late 1960s. Mobility continued to gradually decline before a bump upward in the mid-1980s. Since about 1985, however, the overall trend has been one of declining mobility.

It used to be that a young adult got married, bought his or her starter home and, in a few years, moved up to a bigger home (maybe more than once). Couples moved for new career opportunities (maybe more than once). Having children also was a signal that a larger home, perhaps one in the suburbs near good schools, was in order. After retirement, some people downsized into a smaller home, an apartment or a retirement community, or they moved in with their children and, if necessary, into a nursing home.

It is not so cut and dried anymore. There are a number of things that could be impacting Americans’ lack of movement.

Affordability challenges

Certainly, housing affordability is top of mind when it comes to mobility or lack thereof. With home prices rising faster than incomes in about two-thirds of the nation’s housing markets, according to Attom Data Solutions, renting has become a more affordable option.

Owning a median-priced, three-bedroom home is more affordable than renting a three-bedroom property in 53% of the 855 U.S. counties analyzed by Attom Data in its 2020 Rental Affordability Report. Among the 136 counties analyzed in the report with a population of at least 500,000, renting is more affordable than buying a home in 94 counties (69%). In the most populous counties, those with at least 1 million people, renting remains the more affordable option a whopping 84% of the time.

Incentives lacking

The nation’s low mortgage rate environment also could be impeding housing mobility, according to First American Financial Corp. chief economist Mark Fleming, who raised that issue during a recent housing webinar. Homeowners who already have a low mortgage rate between roughly 3.5% and 4% won’t be incentivized to sell and move unless the rate drops even lower to, say, 3%, Fleming said.

The only thing that makes housing more affordable if income doesn’t increase and prices don’t decrease is mortgage rates. Lower rates equate to increased purchase power.

Flat rates, however, don’t provide the needed incentive for people to list their home and move. "Flat rates are almost as bad on the supply side as rising rates because there’s no benefit — there’s no penalty — but there’s no benefit … to move," Fleming said.

Technology impacts

Technological advancements could be impacting mobility. Employers are seeing the benefit of saving on brick-and-mortar office space through remote worksites. The expansion of broadband data networks throughout the country offers employees — even those in rural or midsized cities — the opportunity to work from home without sacrificing access to highspeed internet and secure connections.

With technology, some professionals can change jobs without having to move, even if their new job is in a different city or a different state. Improvements to other types of technology, such as videoconferencing via Wi-Fi on a laptop, has reduced the need for all parties to be on site for important meetings and has facilitated the ability of global companies to connect more seamlessly.

Generational factors

Two large generations, the millennials and the baby boomers, are the main forces in the nation’s mobility trends. The U.S. population is aging and baby boomers, who are about 55 to 74 years old, are waiting longer to retire.

Boomers also are aging in place, with some skipping the step of downsizing altogether. Others who are downsizing are waiting until later in life to make the move to a smaller space. All of this affects housing inventory, which has been constrained for a number of years. Fifty-two percent of boomers say they’ll never move from their current home, according to a 2019 Chase Bank survey of 753 boomer homeowners.

Millennials also are a key driver of the trend toward migration stagnation, according to the Brookings Institution. Young people typically are the most mobile, but the millennial generation was hit hard by the housing crisis and the Great Recession, both of which affected their mobility. Brookings noted that millennials have had to deal with "stuck-in-place" issues, such as high housing costs and underemployment, which have postponed key life events such as marriage and homeownership.

There are indications that millennials are looking beyond popular gateway cities such as New York, Los Angeles and San Francisco to midsized cities in the Southeast or the Midwest where they can afford an entry-level home. Fleming noted that millennials, as they age into their 30s, want to become homeowners. The generation after them also will want to own homes but, like the millennials, they may make the jump later in life than previous generations, choosing to rent for a longer period of time.

"What does this trend toward fewer moves mean for mortgage originators? That might depend upon whether the originator focuses on homebuyers who are owner-occupants or those who are investors."

Potential consequences

What does this trend toward fewer moves mean for mortgage originators? That might depend upon whether the originator focuses on homebuyers who are owner-occupants or those who are investors.

"This could be beneficial for landlords renting single-family homes. The biggest challenge for many landlords is replacing a tenant who moves out, so the longer a renter stays, the better for the landlord in most cases," said Rick Sharga

, president and CEO of CJ Patrick Co., a California-based consultancy focused on real estate, financial-services and technology companies.

"On the other hand, I believe this trend has a potential downside for SFR investors," Sharga said.

"The longer tenure of homeowners is a major factor in keeping homes off the market. This reduces the inventory that investors have to choose from."

So, there’s a Catch-22. Demand for rental units continues to increase, yet lack of housing stock makes it challenging for SFR investors to add to their portfolios. Lack of inventory also has the effect of driving up prices, increasing investor acquisition and financing costs.

Whether this trend of a mobility slowdown continues is uncertain. Brookings posits that if the economy strengthens, then mobility might rise somewhat for millennials and their Generation Z counterparts. Still, the overall trend line suggests less mobility, not more, and the mortgage industry will be among the sectors impacted — maybe in ways it doesn’t yet anticipate.

Source: Scotsman Guide April 2020 Issue Author: Robert Greenberg