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MReport October 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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12 | TH E M R EP O RT TAKE 5 Prices, Home Growth, and So Much More Last month saw increases in multiple market segments, but savvy market watchers should keep an eye on how new legislation could impact the housing sector moving forward. 1 Tariffs to Impact Housing: According to calculations by the New York Times, tariffs on Chinese imports put in place last month have builders worried that construction costs will rise by 20 to 30 percent. 2 First-Time Homebuyers Lead Q2 Growth: Genworth's First-Time Homebuyer Market Report showed that the market share for first-time homebuyers has increased and is currently demonstrating the largest Q2 numbers since 1999. 3 Fixed-Rate Mortgages Still the Loan of Choice: According to Fitch Ratings, 90 percent of Reverse Mortgage-Backed Securities (RMBS) contain fixed interest rates for their full term this year, meaning U.S. mortgage borrowers still choose fixed-rate mortgages as their loan of choice. 4 Tracking the Growth of PMIs: Private-mortgage insurers reported $80.3 billion in new insurance written in Q2 2018, a 14 percent increase year-over-year, according to Moody's Investor Service. Moody's noted that this was the first time new insurance written had surpassed $80 billion since 2016. 5 Loan Denial Rates Across Races: According to new research by Urban Institute, the racial gap between homebuyers is closing. In 2017, the denial rate was 9 percent for nonHispanic whites, 18 percent for nonHispanic blacks, 13 percent for Hispanics, and 11 percent for Asians. 6 Saying Less for More—Jumbo Loans: Since 2013, large-balance mortgage loans (jumbo loans) have broken the trend of holding a higher interest rate than smaller conforming loans. In Q1 2018, jumbo loans were 33 basis points cheaper to the borrower than a conforming loan, according to CoreLogic. 7 Thinking Outside the Origination Box: Nonconventional loans are most popular in the South Atlantic and West South Central Divisions of the United States, according to a recent analysis of the 2017 Census Bureau Survey of Construction by the National Association of Home Builders. 8 Mortgage Credit Availability: Mortgage credit access is expanding but remains restrictive compared to precrisis days, as reported in the most recent Housing Credit Availability Index from the Urban Institute. However, Home Mortgage Disclosure Act data for 2017 revealed a denial rate of 11 percent in 2017, down from 18 percent in 2006, which the Urban Institute described as running "counter to our expectations." 9 The Rising Impact of Debt: Total household debt has risen for 16 straight quarters, reaching a new peak in the second quarter, according to the Quarterly Report on Household Debt and Credit released by the Federal Reserve Bank of New York. 10 Looking Ahead to 2020: Home-price appreciation is slowing down, but experts believe we won't see the housing market flip in favor of the buyer until around 2020, according to a Q3 2018 Zillow Home Price Expectations Survey conducted by Pulsenomics. on a jumbo-sized townhouse in Chicago because he was under the impression—as are many mortgage originators and real - tors—that you can't do a jumbo VA loan. That's not accurate at all. I had to put down 7.5 percent more than I would have, which was a lot of money at the time. I could have used that money to furnish a house, to do any num - ber of things and still maintained some savings. There are 20 million veteran households out in the country. Ninety-five percent of the time on a primary residence, a VA loan would be the right option, or at least a viable option for a veteran. There's a lot of misunderstand - ing and miseducation out there amongst both the real estate and mortgage industries on how the program even works. Certainly, the veterans aren't trained on it. So it's a tremendous opportunity to educate these service members about how to use the benefits that they earned Unfortunately, one of the reasons these misunderstandings persist is because there's a lack of understanding about the program and how to execute it. People think it's harder to do when it's actually way more flexible. It's a little different than your traditional conforming or FHA loan. There are some different guidelines, but, frankly, those guidelines are looser. My experience in the military gave me an understanding of those needs, so that's a mission of ours at BBMC—to serve veter - ans better than any mortgage company in America. We do that through education and the outstanding execution of our VA loan program. M // What is one thing you wish more people understood about what you do? JONES // The mortgage industry is a wonderful industry that en- ables people to take advantage of homeownership with outstanding products that make owning your own home both affordable and safe from a risk standpoint. These 30-year fixed products are in the consumer's best interest. They are not created to be great products for banking instruments. Almost nobody would take their money and invest it in something that's going to provide a small return over 30 years. From a perception standpoint, I wish people understood just how impactful the mortgage industry is in making homeownership a reality for so many hundreds of millions of Americans. We have a system that is set up to make sure you're getting into a home that you can afford, that you can pay for, so you can enjoy the American Dream. Our businesses are stimulators of the American Dream because homeownership is a critical piece of that. MONTH IN REVIEW "This younger generation lived through the 2008 housing crisis. That shook a generation and fundamentally challenged the concept of real estate being a reliable bet. We have a generation who saw their parents lose their retirement savings."

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