MReport September 2019

TheMReport — News and strategies for the evolving mortgage marketplace.

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48 | TH E M R EP O RT 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 Finding Renewed Purpose Mortgage brokers are thriving as more millennials look at partnering with them in the loan process, according to an expert. R eal estate brokers are finding a renewed life in the market according to Anthony Casa, Chairman of the Association of Independent Mortgage Experts (AIME). Speak- ing at the second annual National Mortgage Brokers Day, Casa said that mortgage brokers were better for the second year in a row. "One out of three millennial homebuyers now partner with a mortgage broker to help them finance their first home," Casa said. "Millennials are doing more research and finding mortgage brokers to provide more savings, personalized service, and no fees." Casa—who also appeared of Cheddar TV's Morning Bell show—said millennial homebuyers will push brokers into the fourth- largest lending force, by volume, by early 2020. "More than 70 million millenni- als still do not own a home, and are using brokers to help them find the best deal on a loan," Casa said. "The big reason why that's happening is, the starter home price is fairly high, and many millennials are coming into the market and not able to find a property in their price range that they really desire, coming out of their rentals." He added that working with independent brokers creates an opportunity to help first-time buy- ers get the property the want, or the ability to borrow at lower in- terest rates, as brokers can deliver "at least a half a percent lower" than most banks and lenders. "So you're increasing your buy- ing power, or the ability to have an expert hand walk you through renovation financing and set up the fixer-upper loans that are out there," he observed. "Freddie Mac just rolled out a new fixer- upper program, and that's the market that mortgage brokers do exceptionally well in. From my perspective, I think when it comes to this homebuyer, or the millennial homebuyer, that they really need something that's not cookie-cutter." Utilizing brokers for millennial buyers can also help them get into the home they want without paying the traditional 20% down payment, Casa said, adding that the average down payment for a millennial homebuyer over the past two years has been about 5%. While the housing industry is quickly integrating technology and automated processes, Casa said the issues with using technology in the mortgage realm is the lack of education that takes place. Casa said that while brokers are finding a renewed market in the millennial buyer, there is an "acceleration" of banks re-entering the mortgage space—nearly a decade after the housing crisis. He said the first major bank to remove itself from residential mortgage was Wells Fargo in 2008, with many following suit. However, lenders are coming back and it's a trend that seems to be gaining steam. "I mean just in the last 12 months, you have the number- three lender in the country, PennyMac Home loans…they opened a wholesale division. Mr. Cooper, which is one of the biggest servicers in the country, acquired Pacific Union Financial, and they entered the wholesale space," he said. The reason for the change, ac- cording to Casa, is the removal of fraud, greed, and misrepresentation that plagued the industry in 2008. "And then they transition, through regulation, turned into financial advisors and there was licensing, there was a lot of kinds of due diligence that went into becoming an advisor and there's a lot of checks and balances," he said. Extra Credit A Federal Reserve report pointed to credit increases for potential homebuyers. C onsumer credit totaled $4.1 trillion on a season- ally adjusted basis ac- cording to the latest G.19 Consumer Credit Report from the Federal Reserve. Additionally, the Fed found that revolving debt totaled $1.1 trillion, and found $3 trillion in non-revolving debt, an increase of $17 billion from the previous month. Consumer credit increased at a seasonally adjusted annual rate of 5%, and non-revolv- ing credit increased at an annual rate of 4%, the report indicated. According to the National Association of Homebuilders (NAHB), the non-revolving debt increase is a good sign for the sentiment of American consum- ers, especially for those looking to make large purchases, such as houses. Potential homebuyers are increasing their credit card purchases and opening of credit card accounts. For the first time in five months, as of April 2019, revolving debt increased from the previous month at a faster rate than non-revolving debt. "The trend continued in May," The NAHB said. "Interestingly, in May, there was also a series of declines in purchase mort- gages, per the Mortgage Bankers Association's weekly reports. One possibility is that the freeing of this type of non-revolving debt has made other non-revolving debt loans more appealing." According to the Fed, poten- tial homebuyers are feeling more optimistic about their finances. The Federal Reserve Bank of New York's June Survey of Consumer Expectations found that respondents were more optimistic regarding their financial situation and the labor market. Expectations on the U.S. unem- ployment rate, finding a job, and losing one's job all improved. Consumers' expectations of an increase in the average interest rate on savings accounts over the next year declined to their lowest level since May 2015, according to the survey.

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