MReport March 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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62 | M REPORT SECONDARY MARKET 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 Getting It REIT Real Estate Investment Trusts could prove to be a stabilizing force within the mortgage market. A s the role of non-bank lenders has shifted in the past few years, reg- ulators are considered allowing further growth for these mortgage institutions and real- estate investment trusts (REIT), Wall Street Journal reports. "It's time to make the sys- tem reflect the market that it serves," said Pete Mills, SVP of Residential Policy at the Mortgage Bankers Association, in a recent Wall Street Journal article. While some have questioned if nonbanks like REITs should have access to taxpayer-subsi- dized funding, according to John von Seggern, President of the Council of Federal Home Loan Banks, having big clients gives the system the financial clout it needs to support smaller banks. "We have access to world- wide markets because the big banks give us a lot of volume," he told the Journal. "We're able to then take that favorable fund- ing that we get and we're able to lend it to all of our members, big and small, at the same rate." Some suggest that REITs make up a backbone of sorts for the mortgage market, leveraging less risk than before the financial cri- sis and able to quickly raise and deploy money when they see an opportunity. "Real estate is protected from volatility by factors like location, scarcity, and plot size," NuWire states. "But unlike tangible prop- erty, which is expensive to buy and tough to sell, REITs can be traded on many investing apps. Because they come in single shares, even low-budget inves- tors can diversify their REIT holdings." According to WSJ, the pro- posed expansion of home-loan banks and REITs would run counter to the plan to privatize Fannie Mae and Freddie Mac. "While Fannie and Freddie buy mortgage loans and package them into securities, the Federal Home Loan Banks play a dif- ferent role in housing finance: channeling money from global bond markets to thousands of institutions across the U.S.," the Wall Street Journal said. Looking on the Brighter Side 59% of those surveyed by Fannie Mae believe now is a good time to buy. F annie Mae's Home Pur- chase Sentiment Index (HPSI) rose for the third consecutive month, growing 1.3 points in January to 93—just in sight of the survey's high of 93.8. Four of the six HPIS com- ponents, including the share of Americans who believe mortgage rates will go down over the next year, increased from December. The share of Americans who believe mortgage rates will go down is now 55%. On a year-over-year basis, the HPSI is up 8.3 points, and according to Fannie Mae, this is due in part to the consumers' "increasingly positive view" that it is a good time to buy a home. "The HPSI posted another strong reading to open the new year, helped in large part by the upward trend in the share of con- sumers saying they expect mort- gage rates to remain steady," said Doug Duncan, SVP and Chief Economist. "Low rates continue to be a key driver of consumer optimism about both current homebuying and home-selling conditions. Favorable views on job security and personal financial expectations reflect the strength of the labor market, which we believe will continue to bolster housing demand. "With much-needed inven- tory set to come online this year, offering a modicum of relief to the shortage of entry-level sup- ply, this month's HPSI reading remains consistent with our lat- est macroeconomic forecast and our theme for 2020: A Resilient Economy Overcomes Risks to Drive Housing." The number of Americans who believe now is a good time to buy was unchanged from December at 59%, while those who think it is a bad time to buy fell from 32% to 30%. Sixty-six percent of Americans think now is a good time to sell, which is a marginal month-over- month increase from 65%. Those who believe it is a bad time to sell fell to 21% from 22%. However, half of all surveyed said they think home prices will increase over the next year—an in- crease from the prior month's 48%. Current homeowners are reaping the rewards of falling mortgage rates, as Black Knight reported 11.3 million are now eligible for refinancing. Black Knight estimates average poten- tial monthly savings of $3 billion. Freddie Mac reported mortgage rates are at a 3.5-year low at 3.45%. The average bor- rowers could save $268 a month. LendingTree also found that almost 75% of refinance applica- tions are approved. For the 25% of applications denied, the top reasons for denial were debt- to-income ratio, credit history, income application, and insuf- ficient collateral. A too high debt-to-income ratio caused 26.1% of all denials. Most of the denials came in ex- pensive metros such as San Jose, California; Honolulu; Bridgeport, Connecticut; San Francisco; and New York. Ogden, Utah's, 83.8% approval rate was highest in the nation. Ogden's leading cause of de- nial was credit history at 25.6%. Madison, Wisconsin, was a close second at 82.9.

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