MReport April 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 41 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION How Wells Fargo is LIFTing Communities The bank's initiative has helped with the purchase of $2 billion in real estate since 2012. F rom homebuyer educa- tion to down payment assistance, Wells Fargo's NeighborhoodLIFT program (LIFT program) in as- sociation with NeighborWorks America has invested $442 mil- lion since it began the program in 2012, creating nearly 20,000 homeowners across the U.S. The bank said that through this investment it launched 67 LIFT programs to support sustainable housing, especially for low- and moderate-income buyers. "Owning a home is a primary driver of economic se- curity and the cornerstone of the American Dream, yet access to affordable housing is a significant challenge in communities across the country," said Tim Sloan, CEO and President, Wells Fargo. Looking at the impact of the program, an analysis by NeighborWorks America indi- cated that 61 percent of LIFT homeowners represented low- and moderate-income households and that among the LIFT buyers surveyed, 42 percent paid less for housing than they did previously. "NeighborhoodLIFT is a ter- rific collaborative success that makes homeownership achiev- able and sustainable," said Kim Smith-Moore, National LIFT programs Manager, Wells Fargo. "The program has made a real difference in the lives of nearly 20,000 people and families—with the majority of them representing underserved, low- and moderate- income households—by helping them prepare to be successful homeowners." The analysis also indicated that 80 percent of the people who bought a home through this program state that the homebuyer education service they received through LIFT would help them manage their finances. Wells Fargo said that more than 60,000 potential homebuyers had re- ceived housing counseling from a NeighborWorks network member engaged in LIFT programs. It also indicated that from the time it had started, the program has helped with the purchase of $2 billion in real estate. "The program is helping families meet the challenge of coming up with a sufficient down payment, and the required housing counsel- ing education classes are proven to help buyers both prepare and achieve their goals of responsible homeownership," said Marietta Rodriguez, President and CEO of NeighborWorks America. "For families who do not currently qualify, financial education and counseling are offered to help pre- pare for future homeownership." The program, which offers homebuyer education, as well as down payment assistance grants in local communities, first began in Los Angeles and Atlanta. In 2018, with a commitment of $75 million, the program expanded to Atlanta, New Mexico, Boston, Kansas City, Chicago, Des Moines, Mississippi, Charlotte, and Orlando. Wells Fargo said that the program also added special parameters to enable hundreds of teachers, military service members, veterans, and first responders to achieve homeownership. Interest Rates vs. Mortgage Volumes What is the likelihood of a disruption in mortgage performance amid rising interest rates? R ising interest rates will not disrupt the U.S. mortgage volumes or performance, according to S&P Global Ratings. In its report entitled "U.S. Residential Mortgage Finance 2019 Outlook: Rising Interest Rates Likely Won't Disrupt Mortgage Volumes or Performance," S&P indicated that the relative effect of rising inter- est rates on housing affordabil- ity in the U.S. will become less pronounced in 2019. This is on account of moderation in home price growth, rising wages, and shifts in demographics wherein millennial home purchases will surge, the report noted. Although the housing finance reform will remain in the lime- light, the recent increase in the conforming loan limit hints at only a slight chance of change in 2019. S&P also stated that the lat- ter part of 2018 marked a turning point in the historically low inter- est rates and strong home price appreciation (HPA) that prevailed over the past several years. The increase in mortgage rates, however, became more substantial, however, home prices showed signs of cooling off in the latter part of the previous year relative to the 5–7 percent annual HPA recorded since 2014. The re- port projects tempered HPA this year, with home purchase lending volume outpacing that in 2018 as mortgage refinancing activity falls with increased interest rates. The outlook article stated that the rising mortgage rates that will only be a mild deterrent to pur- chase activity in 2019. The annual volume of origination is anticipated to flatten with a shift to purchase originations from refinancings. The report also revealed that non- qualified mortgage market expected to experience the largest percent- age growth. As millennials enter the housing market, it is likely to strengthen the housing demand across the U.S, it noted. The outlook article stated that the rising mortgage rates that will only be a mild deterrent to purchase activity in 2019.

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