TheMReport — News and strategies for the evolving mortgage marketplace.
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42 | 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 Cause and Effect How will insurance rate reductions impact mortgage affordability? S ince 2015, FHA mortgage loans have been more attractive than private or GSE loans for borrowers. But that might be changing accord - ing to a recent report by the Hous- ing Finance Policy Center (HFPC) of the Urban Institute. According to the April "Housing Finance At A Glance Chartbook" by the institute Private Mortgage Insur - ance (PMI), companies are joining the race to cut insurance premiums that will likely offset the attractiveness of loans offered by FHA. The report indicated that the April 2016 reduc - tion in PMI rates for borrowers with higher FICO scores and reduc- tion by companies like the Mortgage Guaranty Insurance Corp (MGIC) in 2018 for borrowers with lower credit scores are likely to give stiff competi - tion to FHA rates. Giving an example, the report says a borrower putting 3.5 percent down payment would now find FHA more economical except for those with FICO scores of 720 or higher. It found that with premium reductions by PMI companies on the way, this breakeven FICO would move lower as the rates for PMI became more attractive than FHA, for borrowers with a higher credit score. "As a result, there will be a shift in the market share as FHA loses many 720 to 740 FICO borrowers to PMI, although FHA's share will likely stay within the historical range of 10 to 15 percent of total originations," the report said. "Because these are also the most creditworthy borrowers for the FHA, their loss would increase the share of lower quality loans in the FHA's book of business." The HFPC report, which provides a snapshot of monthly mortgage and housing market data, also compared the perfor - mance of banks to nonbanks and mortgage credit availability. The data indicated that nonbanks were more accommodating than banks as the median debt-to-income level for mortgages issued by them con - tinued to increase in March. The debt-to-income ratios for banks stayed flat during this period. It also became slightly easier for borrowers to get a mortgage dur - ing the month with the HFPC's housing credit availability index indicating that credit availability expanded to 5.8 percent in Q 4 of 2017, the highest level since 2013. This increase was mainly driven by the credit expansions within both the GSE and government channels, thanks to higher inter - est rates and lower refinance volumes. Embracing Texting Culture Borrowers prefer text messaging in the loan process, a new eBook reveals. T exting is the second-most preferred method of communication for most types of messages, espe - cially among mortgage borrowers according to a new eBook, titled "Great TEXTpectations: The Text Messaging Playbook for Lenders," by mortgage technology platform provider, Ellie Mae. While 58 per - cent borrowers surveyed by Ellie Mae say they responded to text messages within 10 minutes, 76 percent believed that text speeds up the loan process. This study expands on earlier research by Ellie Mae on borrowers' shifting communication preferences by taking a closer look at how today's borrowers want lenders to use text messaging to help them complete the mortgage process. To understand the gap between borrowers' expectations around text messaging and lenders' adapt - ability of this medium of com- munication, Ellie Mae conducted online surveys of more than 500 borrowers who obtained a mortgage within the past 10 years. Similarly, Ellie Mae conducted online surveys of more than 350 lenders, from both large and small firms, with 57 percent of lenders from firms with 1-50 loan officers. If lenders are worried about the appropriateness of sending a text message to a borrower, here are some statistics from the study that can put those worries to rest. Borrowers are very willing to receive text messages from a lender with around 88 percent of respondents to the survey saying they felt it was appropriate for a lender to text them. This number grew among respondents who took out a loan in the last 12 months, with 97 percent of this group saying it was appropriate for a lender to text them. These trends point to a signifi - cant opportunity for lenders to build stronger borrower relation- ships and accelerate the loan process by making texting a more central part of a multichannel lender communications strategy. But despite the willingness of bor - rowers and the opportunities text messaging provides to lenders, the study found only 28 percent of the lenders surveyed always or almost always texted borrowers. This doesn't mean lenders don't recognize the value of a text message. The study found almost all lenders believed that text sped up or at least had the potential to speed up the loan process. Ellie Mae found an increasing number of high-growth lenders have recognized text's potential to help reinvent the entire mortgage experience for today's digital consumers. But the opportunity remains untapped for many others, even though 87 percent lenders say they planned to increase their use of text over the next five years. A borrower putting 3.5 percent down payment would now find FHA more economical except for those with FICO scores of 720 or higher.