What Trends Will Impact Homeownership in 2017?

According to the recent Fannie Mae Economic Developments report, issues with housing inventory continue to plague the market due to an increase in household formation that housing supply cannot keep up with. The report says that these factors will be the biggest issues facing renters looking to move into homeownership.

“The number of existing homes for sale declined 6.8 percent in the third quarter from a year ago, marking the sixth consecutive quarter of year-over-year decreases and the largest drop since the second quarter of 2013,” says Fannie Mae. “CoreLogic data by price tier continued to show tighter supply and more rapid price gains in the lower tiers of the home sales market.”

Despite these challenges Fannie Mae says, “encouragingly, the homeownership rate has recently shown signs of stabilization.”

“The rate rose 0.6 percentage points in the third quarter, offsetting the drop in the prior quarter, and stood two-tenths below the rate in the third quarter of 2015,” adds the GSE.

E. Thomas Booker, III, Managing Director at the Collingwood Group, shares similar sentiments for the increase in homeownership and the direction the rate is headed in the next few months.

“The homeownership rate can also be thought of as a measure of the confidence in the economy,” says Booker. “I believe homeownership rates will increase in 2017.  Continued job growth, sustained income gains, and the expectation of increased economic activity will tempt many who have a bias for owning, but have endured years of steadily increasing rental rates, to a decision point.”

Booker adds, “If growth rates are closer to 2 percent or greater, the homeownership rate will be a primary beneficiary. As long as rates rise moderately and the political environment does not become a major economic consideration (taxes, radical changes to healthcare, entitlements etc.), 2017 should be bullish for housing and homeownership.”

In likeness to Booker’s predictions, Fannie Mae’s report states that they anticipate improvement in housing activity particularly with housing starts and home sales in 2017.

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Embracing the Challenges of the Mortgage Industry

dana-dillard

With over 25 years’ mortgage servicing experience, Dillard has worked at many large servicing organizations with a focus on the customer and default. Currently, Dillard serves as the Chief Customer Officer at Nationstar Mortgage where she has responsibility for industry relations, nonprofit engagement as well as the Customer Advocacy team.

Prior to joining Nationstar, Dillard worked at GMAC RESCAP where she managed the REO, Liquidations, and Community Outreach teams during the peak of the housing crisis. Dillard has held other senior leadership positions at EMC Mortgage, Bank of America Mortgage, and Lomas Mortgage.

Dillard considers one of the highlights of her career to be leading the outreach efforts at HOPENOW from 2008-2010 where she traveled across the country talking with hundreds of struggling families. For that work, Dillard received the Five Star Institute’s Humanitarian of the Year Award in 2009. A Dallas native, Dillard is a graduate of SMU with degrees in Journalism and Business.

What drew you to the mortgage industry and being a mortgage professional?

Initially what drew me was the fact that I needed a job, but what has kept me in it is the challenge. I have always been very fortunate that just when I start to feel like I have learned a lot and I am ready for new challenges, those challenges come along.

What are some of the challenges of being a woman in the housing industry?

Like with every industry, the higher up in organizations you get the fewer women you’ll find, and it can be very isolating. Sometimes you can be the only female in the room, but that doesn’t mean that as a woman you can’t be heard. That is something that I have to continue to work on. How can I contribute? How can I add value? How can I make sure that when I do get that opportunity that I am saying something that is worth listening to? Most companies have lots of females at the frontlines and the first couple of layers but it’s that next layer that we as the industry have to step up our game and make more of a balanced approach for women. We must also as an industry create environments where women can really thrive and not feel like they can’t be themselves at work.

What are some of the benefits to being a woman in the mortgage business?

I think we are great listeners, and we have a lot of empathy. Especially during the housing crisis when so many families were hurting, there was a need for creativity and looking at things from a different perspective, and I think women brought it when it came to those challenges. That is our secret weapon. We can see the people side, and we can find a way to relate to it. I have always worn the customer hat, and I think because of that and making those connections, that is what my gift is.

What advice do you have for young women looking to enter into the industry?

I would encourage women to really give some good thought as to what they want to do. Do not be passive about your career or wait for someone to come to you with an opportunity. Instead, really think about what your gift is and how you can contribute and to find ways to align yourself with that type of work.

I love customer work so I always try to find a way to be with the customer and in the community. But if you are an Ops person, push yourself to that side. If you are a relationship person, maybe work more on the sales side. But I think that is the piece sometimes that women don’t give enough thought to. Women should ask, “what do I want to do”, not “what is being offered to me.” I think that the opportunities in this industry are endless. Every position that I’ve had, I have been able to turn it into something I want it to be.

Bank of America Receives High Marks from Fitch Ratings

Tech Sights BH

A recent report from Fitch Ratings indicates that Bank of America has received a rating of “Outlook Stable” and “RPS2-” for five servicing products including Prime, Alt-A, HELOC, Subprime, and Second Lien. But what did this high-profile bank implement that contributed Fitch Ratings’ high scoring?

The report says that for the review period ending on June 30, 2016, the bank’s “comprehensive internal control environment”, “continued investments in technology”, and “incremental operational enhancements” earned them the Fitch Ratings’ rankings.

Specifically, Fitch reports that Bank of America’s comprehensive internal control environment including internal audit, compliance, and QC testing, made a large impact.

“The company’s internal audit results for the servicing operations continued to show improvement,” says Fitch Ratings. “[Bank of America]’s Regulation AB report for the year ended Dec. 31, 2015 contained one instance of material noncompliance, a decrease from three instances of material noncompliance in the prior year.”

The report also states that the bank also continued to work during this time to decrease its delinquent portfolio.

“In conjunction with these initiatives, the company has continued to make incremental operational enhancements to servicing operations, including the implementation of an interactive voice system to augment live agent collections calls and virtual messaging, and a new application to provide a centralized location that houses all borrower call notes across the servicing operation,” adds the report.

Though this report only factor’s in efforts done before July, it is clear from the institution’s Q3 Earnings Report that the work to improve its mortgage division has not ceased.

According to the bank’s earning report, a substantial increase in mortgage production was a large driver of the earnings growth. Total mortgage production rose by 21 percent in the third quarter up to $20.4 billion.

“Strong client activity and good expense discipline combined to drive positive operating leverage as we continue to optimize and strengthen our balance sheet,” said Paul M. Donofrio, Chief Financial Officer for Bank of America in the report. “With near-record levels of capital and liquidity, as well as robust underwriting standards, Bank of America is stronger, safer and better prepared to deliver for customers and clients than probably at any time in our history. We remain focused on delivering long-term value to shareholders.”

Housing Market Health Exemplified by Low Foreclosures and Delinquencies

Foreclosure-Four-BH-300x198Mortgage servicing professionals are looking at the lowest foreclosure numbers in more than a decade. Foreclosure starts from October 2016 have fallen to their lowest level since January 2005, according to the month-end mortgage performance report curated by Black Knight Financial Services, Inc.

National mortgage numbers experienced a staggering change from September to October. According to Black Knight, there were approximately 56,500 foreclosure starts in October, the lowest one-month total in nearly 12 years. The low number of foreclosure starts represented an 8 percent decline from September and a 22 percent decline from the previous October.

Ben Graboske, EVP of Data & Analytics at Black Knight, attributes the low number of foreclosure starts to home price appreciation and employment gains.

“At a high level, the current low in foreclosure starts reflects the continuation of a trend of recovery from the great recession,” he said. “Both U.S. housing and the overall economy are very healthy. In particular, home price appreciation and employment strength are two of the largest contributors to this continued trend.”

A large number of missed mortgage payments had a significant impact on October’s performance numbers. The report discusses loan delinquency,  or the number of mortgage loans payments that are 30 or more days past due, but not in foreclosure. Statistics show that the U.S. loan delinquency rate is at 4.35 percent, which is a 1.84 percent month-over-month increase from September. The national delinquency rate is still down 9 percent from October 2015. The five states with the highest percentage of loans 90 or more days delinquent are Mississippi (3.43), Louisiana (3.05), Alabama (2.37), Arkansas (2.06), and Tennessee (1.95).

Graboske states that rising ARM lending rates, increasing interest rates, and the job market will play pivotal roles in the mortgage outlook for 2017.

“Increasing interest rates tend to reduce the refinance share of the market, specifically in higher credit segments, which typically outperform their purchase mortgage counterparts,” Graboske said. “We also typically see a rise in ARM lending as rates rise, which could in turn have a dampening effect on mortgage performance. That being said, we would still expect the overall trend of declining delinquencies and reduction in foreclosure inventory to continue throughout 2017 barring some unforeseen macroeconomic impacts. Significant job losses could slow or reverse this healthy trend, and such a scenario would be further exacerbated should substantial home price depreciation set in. At this point, neither of those factors seem likely to occur in 2017.”

November’s Top Real Estate Markets

Market Studies BH

Realtor.com has revealed the hottest real estate markets in the United States for the month of November. San Francisco, California; Dallas, Texas; Vallejo, California; Denver, Colorado; and San Jose, California were listed as the five most popular markets.

The Dallas housing market, which was at the number four spot last month, is on the rise. Data from a Zillow report released last month stated that Dallas, along with Portland and Seattle, had the highest year-over-year home value appreciation among the 35 largest metros across the country for the third month in a row in October. Zillow also mentioned that home values in Dallas and Seattle have appreciated over 12 percent since last October.

The national price of homes has remained consistent within the summer and fall months. For the fourth consecutive month, the median list price of homes is at $250,000, which is a 9 percent increase from the previous year. Data from Realtor.com shows that low inventory supply and high buyer demand are keeping home prices high.

“After an eventful election, demand for real estate appears to be carrying momentum going into the holiday season,” says Javier Vivas, Manager of Economic Research for Realtor.com. “We expect that to be put to the test, as mortgage rates sky rocket to new highs. But the economic foundations remain strong and most forecasts expect growth as we enter the new year, which should keep waves of buyers intent on entering the market.”

As 2017 nears, economists are looking at fast growing job markets to determine popular markets and trends. Jonathan Smoke, Chief Economist for Realtor.com, told DS News, “The strongest markets for next year also have the job growth dynamics we see this year but also have strong population growth that keeps attracting employers. That population growth is partially a result of relatively strong affordability in housing, which translates into the strongest household growth numbers as well.  That is especially true for markets with the strongest sales growth forecasts.”

The 2017 Housing Forecast also predicts rising rent prices for multiple markets. Svenja Gudell, Chief Economist at Zillow, said, “Rents are still appreciating, but not as fast as they have been. Over the past year, rents rose 1.4 percent. Seattle, Portland and Sacramento reported the highest year-over-year rent growth. This is good news for current renters who are worried about being able to save enough for a down payment to buy a home.”

Rounding out the top 10 are San Diego, California; Stockton, California; Fort Wayne, Indiana; Columbus, Ohio; and Detroit, Michigan.

Freddie Mac’s Mortgage-Related Investments Portfolio Balance Grows

Freddie Mac’s annualized rate for mortgage-related investmentsportfolio in October grew 4.7 percent, a stark contrast from the contraction of 15.8 percent last month. Fannie Mae is set to release its October statement later this month.

This expansion in annualized growth rate pushed the aggregate unpaid principal balance of the portfolio to $309.3 billion as of the end of October. This balance is still $30 billion lower than the 2016 cap of $339.3 billion, which is the amount the portfolio must reach by the end of the year as part of its required reduction.

The value of Freddie Mac’s mortgage-related investments portfolio has declined by approximately $46.3 billion since October 2015, when the aggregate UPB of the portfolio sat at $355.6 billion. For the past 10 months of 2016, the portfolio has contracted at an average rate of 13 percent and has contracted in all but three of the last 13 months (December 2015, January 2016, and now October 2016).

Freddie Mac’s single-family refinance-loan purchase and guarantee volume for September was $22.4 billion, which represented 60 percent of total single-family mortgage portfolio purchases or issuances during the month. Relief refinance mortgages comprised approximately 4 percent of Freddie Mac’s total single-family refinance volume. The serious delinquency rate on mortgages backed by Freddie Mac increased a basis point month-over-month from 1.02 to 1.03 percent.

The number of loan modifications completed on Freddie Mac-backed loans totaled 3,455, which brings the year-to-date total (as of October 31) up to 35,342.

Freddie Mac reported a net income of $2.3 billion in the third quarter, which was an increase from the $1 billion net income seen in Q2. The reduction of the mortgage portfolio and the wind-down of the GSEs’ capital buffer, which is required to be at zero by January 1, 2018, is likely to result in more calls for GSE reform as the Trump Administration takes the helm in January.

Effectively Managing Vendor Networks

 

What trends are you currently seeing in the servicing sector of the industry?

I think from our perspective and what we are hearing is there is a lot of concern from servicers today in managing their entire vendor network. We think this is happening because there is a new focus on making sure that servicers understand the downstream implications of third-party vendor oversight. We feel like we are well positioned as a service provider because of our abilities to answer those questions.

A big part of what’s facing servicers today is not only the ability to manage their vendor networks, but to adhere to all of the CFPB implications and regulatory oversight that they know is there. Servicers are subject to audits non-stop from the state or federal, so I think being a good partner for a servicer today really means that you really need to give them a good comfort level that you are managing vendors and managing data as well. We think that the consolidation of the vendor space will continue to shrink because there are less and less people that can check all the boxes for the servicers.

How do you grow these relationships between servicers and service providers and build them to be stronger?

We believe you should be able to give all market participants the service they need to be successful. It’s about developing and providing technology-lead solutions. As far as looking around the industry and trying to figure out where the next opportunity is, there seems to be a lot of changing and shifting of vendors in the big servicing shops and banks. There has been a steady stream of RFPs and RFIs out and I think people are looking for new ways of attacking old problems. Using data and feedback on performance based on data allows you to differentiate yourself. I think we will continue to see that grow as far as what people are looking to do and how they analyze the problems that they are facing.

How do you work to find solutions for the problems facing the servicing industry?

I think the servicing industry is faced with a real problem around how the servicing fee structure is based today, and I think they are under pressure. The servicing fees haven’t moved in the last few years but their compliance needs and the regulatory and legal environment that they are in today has forced them to increase costs across the platform.

I think we continue to invest in and grow our technology platforms with the idea that you are going to need to be able to provide innovation to the servicers. As the vendor population shrinks, you want to be able to offer more solutions. I think in order to be a part of the servicers you need to be innovative and customize solutions.