MReport June 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

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40 | 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 Reduction of Mortgage Market Forecast For 2020 Mortgage balance expected to fall nearly 1%. A nalysis from Global- Data said a possible rise in delinquency rates from consumers who lost their jobs, less demand for homebuying, and tighter mortgage restrictions could lead to the U.S. mortgage market shrinking in 2020. The data analytics company forecasts a reduction in mortgage balance of 0.9% for the remain- der of the year, compared to the previous 3%. "We expect to see approvals for loans tightening across the board, as banks' liquidity will become stretched. Similarly, consumers will be increasingly wary about taking on extra liabilities due to the increased economic uncertainty," Resham Karira, Retail Banking Analyst at GlobalData said. This release comes after the Mortgage Bankers Association (MBA) found mortgage applica- tion rose by 0.1% from the week prior for the week ending on May 1. The refinance index fell 2% but is still 210% higher than a year ago. The purchase index, however, increased 7% from the prior week but is 19% percent lower than this time last year. "Despite lower rates, refinance applications dropped, as many lenders are offering higher rates for refinances than for purchase loans, and others are suspend- ing the availability of cash-out refinance loans because of their inability to sell them to Fannie Mae and Freddie Mac," said Mike Fratantoni, MBA's SVP and Chief Economist. This was the first time in sever- al weeks that mortgage applica- tions rose, but the purchase index has grown for three consecutive weeks. "Purchase volume increased for the third week in a row, led by strong growth in Arizona, Texas, and California. Although pur- chase activity remains almost 19 percent below year-ago levels, this annualized deficit has decreased as more states reopen amidst the apparent, pent-up demand for homebuying," Fratantoni said. However, a recent Bloomberg re- port found borrowers are running into the toughest loan-approval standards in years. JPMorgan Chase & Co. tight- ened its standards last month, requiring borrowers to have minimum credit scores of 700 and to make down payments of 20% of the home price on most mortgages, including refinances if the bank didn't already manage the loan. Wells Fargo & Co. increased its minimum credit score to 680 for government loans that it buys from smaller lenders before aggre- gating them into mortgage bonds. "Consumers will be increasingly wary about taking on extra liabilities due to the increased economic uncertainty." —Resham Karira, Retail Banking Analyst, GlobalData

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