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Nonbank Lenders Dominating FHA-backed Mortgages
invite response
2017 Jan 22, 6:15pm 1,485 views 2 comments
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1
anonymous
2019 Mar 15, 12:38pm
Lenders continue to lower FICO requirements for new homebuyers
The nation’s major banks are continuing to walk away from FHA-backed mortgages, according to the Urban Institute’s Housing Finance Policy Center February Chartbook.
And not only are nonbanks stepping in to take over the space, overall, they are continuing to ease access to credit.
“Bank and nonbank FICO scores reveal that nonbanks brought the Agency median FICO down four points to 726 between November 2018 and January 2019,” the Urban Institute said in an email.
The average agency FICO score for banks is high at 745, compared to 713 at nonbank lending institutions. Both show FICO requirements on the way down, but it's more pronounced at the nonbanks. Why?
Nonbanks are also more accommodating for increasing debt-to-income ratios, even as mortgage rates overall inch upward, driving up monthly mortgage payments for borrowers.
“The median LTV for nonbank and bank originations are comparable, while the median DTIs for nonbank loans are higher,” the report states.
Here’s the explanation for the trend:
Since early 2017 there has been a sustained increase in DTIs. This is true for both Ginnie Mae and GSE, for banks and nonbanks. Rising DTIs are to be expected in a rising rate environment, as higher interest rates, which usually accompany higher home prices, drive up borrowers’ monthly payments, and the reduction in refinance volumes makes lenders more apt to work a bit harder to get a loan approved for a marginal borrower.
In better news, lenders are also finally making a bit more profit per loan.
“As of January 2019, profitability was $1.91 per $100 of loan which is lower than it’s been for most of the past 10 years but up a bit over the past few months thanks to increased mortgage demand and falling rates at the end of 2018,” the report adds.
However, the report warns that as refi activity continues to dip and rates rise, competition will force originators to lower their rate of lending and begin to erode profitability.
This one chart, from the report, shows the next two years of mortgage lending in a nutshell (click to enlarge). Check out the full year projections for 2019 and 2020. They are both similar in prediction.
https://www.housingwire.com/articles/48432-lenders-continue-to-lower-fico-requirements-for-new-homebuyers?id=48432-lenders-continue-to-lower-fico-requirements-for-new-homebuyers&utm_campaign=Newsletter%20-%20HousingWire%20Daily&utm_source=hs_email&utm_medium=email&utm_content=70810051&_hsenc=p2ANqtz-9Lefx7obntTr8bnSf3IxomSjSzAZQWEj3tzIigb9CX1ZvnRWsA5qSmxYkAPDk54HbbMdUxw0fwNd1Zfe3DK_4xKhBFMw&_hsmi=70810051
The nation’s major banks are continuing to walk away from FHA-backed mortgages, according to the Urban Institute’s Housing Finance Policy Center February Chartbook.
And not only are nonbanks stepping in to take over the space, overall, they are continuing to ease access to credit.
“Bank and nonbank FICO scores reveal that nonbanks brought the Agency median FICO down four points to 726 between November 2018 and January 2019,” the Urban Institute said in an email.
The average agency FICO score for banks is high at 745, compared to 713 at nonbank lending institutions. Both show FICO requirements on the way down, but it's more pronounced at the nonbanks. Why?
Nonbanks are also more accommodating for increasing debt-to-income ratios, even as mortgage rates overall inch upward, driving up monthly mortgage payments for borrowers.
“The median LTV for nonbank and bank originations are comparable, while the median DTIs for nonbank loans are higher,” the report states.
Here’s the explanation for the trend:
Since early 2017 there has been a sustained increase in DTIs. This is true for both Ginnie Mae and GSE, for banks and nonbanks. Rising DTIs are to be expected in a rising rate environment, as higher interest rates, which usually accompany higher home prices, drive up borrowers’ monthly payments, and the reduction in refinance volumes makes lenders more apt to work a bit harder to get a loan approved for a marginal borrower.
In better news, lenders are also finally making a bit more profit per loan.
“As of January 2019, profitability was $1.91 per $100 of loan which is lower than it’s been for most of the past 10 years but up a bit over the past few months thanks to increased mortgage demand and falling rates at the end of 2018,” the report adds.
However, the report warns that as refi activity continues to dip and rates rise, competition will force originators to lower their rate of lending and begin to erode profitability.
This one chart, from the report, shows the next two years of mortgage lending in a nutshell (click to enlarge). Check out the full year projections for 2019 and 2020. They are both similar in prediction.
https://www.housingwire.com/articles/48432-lenders-continue-to-lower-fico-requirements-for-new-homebuyers?id=48432-lenders-continue-to-lower-fico-requirements-for-new-homebuyers&utm_campaign=Newsletter%20-%20HousingWire%20Daily&utm_source=hs_email&utm_medium=email&utm_content=70810051&_hsenc=p2ANqtz-9Lefx7obntTr8bnSf3IxomSjSzAZQWEj3tzIigb9CX1ZvnRWsA5qSmxYkAPDk54HbbMdUxw0fwNd1Zfe3DK_4xKhBFMw&_hsmi=70810051
2
anonymous
2019 Mar 15, 12:40pm
FHA eliminates two "unnecessary and outdated" lending roadblocks
The Federal Housing Administration has taken steps to reduce some of the regulatory burdens that belabor the lending process, releasing two mortgagee letters Tuesday with updated guidelines on home warranty and inspection requirements for single-family FHA loans.
Mortgagee Letter 2019-04 eliminates the FHA Inspector Roster in order to expand the pool of inspectors for lenders.
The FHA said industry standards and local regulations are sufficient enough to ensure inspector qualifications, making FHA’s standards redundant.
“There is no longer a need for HUD to maintain and administer its own standardization process for inspectors,” the mortgagee letter stated.
Mortgagee Letter 2019-05 streamlines guidelines for home warranties by eliminating the requirement that borrowers purchase 10-year protection plans for new construction homes, reducing expenses for the borrower.
The FHA said homebuyer and builder’s one-year Warranty of Completion of Construction provides enough assurance that the home was built properly and the borrower is protected.
Under the one-year warranty, the FHA said "the warrantor agrees to fix and pay for the defect and restore any component of the home damaged in fulfilling the terms and conditions of the warranty."
FHA Commissioner Brian Montgomery said in a LinkedIn post on Wednesday that the moves were part of an overall effort to enhance procedures to lenders.
“Shortly after arriving back at FHA in June 2018, I indicated one of our goals was to streamline and update our program guidelines and procedures,” Montgomery wrote. “In parallel with the Administration’s objectives of reducing regulatory barriers, late yesterday we released two Single Family Mortgagee Letters (2019-04 and 2019-05) where we’ve eliminated two unnecessary and outdated regulations that have been barriers for lenders.”
Audio Link etc. in this link: https://www.housingwire.com/articles/48433-fha-eliminates-two-unnecessary-and-outdated-lending-roadblocks
The Federal Housing Administration has taken steps to reduce some of the regulatory burdens that belabor the lending process, releasing two mortgagee letters Tuesday with updated guidelines on home warranty and inspection requirements for single-family FHA loans.
Mortgagee Letter 2019-04 eliminates the FHA Inspector Roster in order to expand the pool of inspectors for lenders.
The FHA said industry standards and local regulations are sufficient enough to ensure inspector qualifications, making FHA’s standards redundant.
“There is no longer a need for HUD to maintain and administer its own standardization process for inspectors,” the mortgagee letter stated.
Mortgagee Letter 2019-05 streamlines guidelines for home warranties by eliminating the requirement that borrowers purchase 10-year protection plans for new construction homes, reducing expenses for the borrower.
The FHA said homebuyer and builder’s one-year Warranty of Completion of Construction provides enough assurance that the home was built properly and the borrower is protected.
Under the one-year warranty, the FHA said "the warrantor agrees to fix and pay for the defect and restore any component of the home damaged in fulfilling the terms and conditions of the warranty."
FHA Commissioner Brian Montgomery said in a LinkedIn post on Wednesday that the moves were part of an overall effort to enhance procedures to lenders.
“Shortly after arriving back at FHA in June 2018, I indicated one of our goals was to streamline and update our program guidelines and procedures,” Montgomery wrote. “In parallel with the Administration’s objectives of reducing regulatory barriers, late yesterday we released two Single Family Mortgagee Letters (2019-04 and 2019-05) where we’ve eliminated two unnecessary and outdated regulations that have been barriers for lenders.”
Audio Link etc. in this link: https://www.housingwire.com/articles/48433-fha-eliminates-two-unnecessary-and-outdated-lending-roadblocks
http://www.housingwire.com/articles/39009-nonbanks-dominate-fha-backed-mortgages
So residential mortgage lending has been tight from traditional depository institutions, which tells me that the residential market is not profitable and/or bears too much risk. However, nonbank lenders have rushed to fill that gap with backing from GSEs...wonderful, taxpayer-backed loans when the shit hits the fan.
From Builder Online. “The Wall Street Journal reported Thursday that Ginnie Mae, the agency that backs FHA mortgages, is worried. Turns out that there still are subprime mortgages, often originated by companies that are not banks and are not as well capitalized. Bonds backed by some of these mortgages topped $1 trillion in November, for the first time. In the event of a downturn in the housing market, this could have consequences that, as the Journal noted, could look much like the S&L crises of the late 1980s.â€
“‘In the first three quarters of 2016, banks accounted for 9% of mortgage dollars originated by the FHA’s top 50 lenders, versus 62% for all of 2010, according to Inside Mortgage Finance. Nonbank lenders accounted for 80% of mortgage bonds backed by single-family FHA loans in July 2016, versus 9% the same month in 2010.’â€
“‘That is worrying the Government National Mortgage Association, or Ginnie Mae, the government-owned corporation that guarantees the bonds backed by FHA loans. Ginnie Mae head Ted Tozer, who is leaving his position Friday, has said nonbank lenders may lack the financial wherewithal to withstand future stress in housing. In the worst-case scenario, problems could saddle taxpayers with losses.’â€
#housing