MReport January 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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50 | M R EP O RT SERVICING THE LATEST 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 One in Three Homeowners Unsure if They Have Insurance In spite of headlines touting damaging natural disasters in recent years, many homeowners aren't feeling spurred to act. A survey by Simple Dol- lar found that while environmental changes are increasing the se- verity and frequency of natural disasters, just 47% of Americans have home insurance and 31% don't know if they are insured. The survey, which polled more than 2,700 Americans, also revealed that 15% of Americans do not insure their homes and 32% are not afraid of their property being damaged. Simple Dollar found that 55% of Gen Z homebuyers, those between the ages of 18 and 24, do not know if they have insurance. Also, one in three homebuyers up to the age of 44 don't know if they are insured. More than 30% of homeowners between the ages of 45 and 54 do not have insurance. The South was found to have the most homeowners with insurance at nearly 60%. One in three homeowners in the Midwest reported not knowing if they have insurance and nearly 20% of homeowners in the Northeast not having insurance—the highest in the nation. Analysis from ValuePenguin found that around 81% of people say they worry about environmental changes, and two-thirds of people don't think enough is being done to combat its effects. While more than half of the respondents who worry about environmental change are homeowners, up to 47% of all homeowners in the survey weren't confident they have enough insurance to protect their property from climate-induced natural disasters. Also, almost 42% of homeowners wouldn't pay more to insure their homes due to climate change. Just 18% would pay $500 or more annually to insure their homes against natural disasters. A report by Zillow in August reveals half of the residents in major U.S. metro areas believe environmental changes will impact their homes or communities. The Zillow Housing Aspirations Report reveals that young adults and people who live in coastal metros are the most likely to anticipate their lives will be impacted by climate change. The report states that around 62% of people ages 18 to 34 say their homes or communities will be affected either "somewhat" or "a great deal" in their lifetimes, compared with 51% of people ages 35 to 54, and only 39% of those 55 and older. Mortgage Bankers Hitting Higher Returns Q3 2019 saw a seven-year high in profits recorded. I ndependent mortgage banks (IMB) hit a seven-year high in profits in Q 3 2019, according to the Mortgage Bankers Association (MBA). In Q 3, IMBs and mortgage subsidiaries of chartered banks reported a net gain of $1,924 on each loan they originated, up from a reported gain of $1,675 per loan in Q2 2019. "A surge in refinance activity and a healthy purchase market led to robust mortgage volume in the third quarter, pushing up production profits to a high not seen since the fourth quarter of 2012 ($2,256 per loan)," said Marina Walsh, MBA's VP of Industry Analysis. "The increase in profits was primarily driven by declining production expenses and higher loan balances, which mitigated the effects of lower basis-point revenue." The purchase share of total originations, by dollar volume, decreased to 60% in the third quarter from 74% in the second quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 62% last quarter. Servicing net financial income for Q 3 was a loss of $62 per loan, compared to a loss of $74 per loan in Q2. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses and gains/ losses on the bulk sale of MSRs, was $43 per loan in the third quarter, compared to $42 per loan in the second quarter. Additionally, total loan production expenses decreased to $7,217 per loan in Q 3, down from $7,725 per loan in Q2. From the third quarter of 2008 to last quarter, loan production expenses have averaged $6,481 per loan. "With higher prepayment activity seen from borrowers refinancing, net servicing income did take a hit for the second straight quarter. Overall, it was a strong summer for independent mortgage banks, with 91% reporting profitability," Walsh added.

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