|Lenders Tightening Credit Access; Index Down for Second Month
Mortgage credit access tightened for the second straight month in March. The Mortgage Bankers Association (MBA) said its Mortgage Credit Availability Index (MCAI) declined 1.5 percent to 177.9 compared to February and has lost 5.0 points since January. The Index was benchmarked at 100 in March 2012.
All four of the component indices were down, with the Government MCAI taking the biggest hit, down 2.1 percent. The Conventional MCAI was down 0.8 percent as was one of its sub-indices, the Conforming index. The second component of the Conventional MCAI, the Jumbo index, was down 0.7 percent.
Joel Kan, MBA’s Associate Vice President of Research and Economics, said, “Mortgage credit availability decreased in March, driven by both conventional and government loan programs. The government MCAI saw the largest decrease, which was driven by investors making adjustments to their interest rate reduction offerings for FHA and VA loans.”
The MCAI is calculated using several underwriting factors including credit score, loan type, and loan-to-value ratio. The four components are constructed in the same way as the composite index and are designed to show relative risk and credit availability for their respective borrower populations. The Conforming and Jumbo indices have the same index date and base as the MCAI, March 2012=100. The Conventional and Government indices have adjusted “base levels” to better represent where each index might fall in March 2012 relative to the 100 benchmark.
“I am pleased with the average wage growth reported Friday, but with home prices increasing at roughly twice the pace of income growth, the 2.7 percent rate is not enough to significantly shrink the current housing affordability gap,” says The Collingwood Group Chair Tim Rood. “You simply can’t expect home price appreciation to rise at twice the rate of income growth forever. Particularly with rising interest rates, incomes will need to pick up to 3 percent growth or higher, and soon, or we can expect the rate of home appreciation to flatten and then fall to compensate.”
read more: Mortgage News Daily
Full Speed Ahead with Mortgage Tech
Technology has been the go-to answer for dealing with change in our industry since around the late 1980s. The mortgage lending business has used technology to automate and digitize a process that had traditionally been buried in piles of paper.
In fact, we have accomplished so much here that most people don’t even notice that our business adopts technology more slowly than just about any other industry.
Changes in our industry have continued to be fomented by both market and regulatory forces. A keen observer of these will attempt to forecast both the business and technological evolutions that must be adopted not just to cope, but to lead. The pace of these changes require that we look several steps ahead. We certainly saw that just after the financial crash, when it became clear that one in 10 home loan borrowers would go into default. The same thing happened to loan origination system (LOS) developers during the run-up to the crash.
With loan volumes three times as high as they had ever been before, lenders were struggling to keep up. The problem was that most of the new business was subprime and the old LOSs didn’t work as well with those “story” loans. They needed new tools if they were going to keep up with Wall Street’s appetite for assets they could securitize. There were plenty of observers in those days warning of the imminent crash. We must look at leading indicators in the development and adoption of new technology with the same diligence that we have always read the tea leaves that might forecast changes in interest rates. With that goal in mind, let’s explore five hot tech trends and see what they may mean for our business in 2018.
- Trend 1: Platform crowding.
- Trend 2: Demand for more transparency.
- Trend 3: Regtech will get built in.
- Trend 4: More tools with mobile reach.
- Trend 5: No paper anywhere.
Read more: DS News
San Francisco’s Median House Price Hits a New High: $1.6 Million
Homebuyers in the red-hot San Francisco real estate market appear to be unfazed by stock-market volatility and tax-law changes.
The median sale price of a house in the city soared to $1.6 million in the first quarter, an almost 24 percent jump from a year earlier, according to a new report from Paragon Real Estate Group. That topped the previous high in the final three months of last year by $100,000.
Quarter-to-quarter fluctuations in median home prices are often not too meaningful, the real estate brokerage said in its report. But prices in the city have been soaring for several years, as “feverish” demand far outstrips supply.
“Fear of possible impending interest rate increases may be playing a role in demand, but consumer confidence has also been soaring over the past year,” Patrick Carlisle, chief marketing officer at Paragon, wrote in the report. “Recent financial market volatility, so far, appears to be having little effect on local real estate markets, but it still early to measure this.”
read more: Bloomberg
How One Small Bank Increased Lending Without Hiring More Lenders
Up against several larger regional banks, Millennium Bank in Ooltewah, Tenn., knows it has to get creative to compete.
So roughly three years ago, management decided it needed to speed up its loan delivery if it hoped to attract and retain borrowers. While it holds one key competitive advantage over big banks — a willingness to make smaller loans that its larger counterparts often overlook — its credit analysis process was highly manual and didn’t accommodate quick turnaround on loans.
“From lender to lender, there was no consistency in the presentation of the analysis,” said John Hatfield, credit officer at the $139 million-asset bank. (Millennium Bank was formerly Community Bank & Trust before changing its name in 2016.)
That has changed since Hatfield joined the bank in 2014. He has led the community bank through a process of upgrading its technology to improve its ability to analyze loans and speed up its decision-making. Many small banks that lack the resources to hire more lenders have made similar investments in recent years in an effort to compete with not just banks, but also nonbank, online lenders. As a result, they can fund loans within hours or even minutes.
read more: American Banker
U.S. Economy Added 103,000 Jobs in March; Jobless Rate Stays at 4.1 Percent
The U.S. economy added 103,000 jobs in March, the Bureau of Labor Statistics reported Friday.
The jobless rate stayed flat at 4.1 percent, and wage growth rose slightly, up 2.7 percent from March 2017.
There is now a job open for every unemployed person in the country, so heftier pay raises should be on the way, said Dan North, chief economist at Euler Hermes North America, a credit insurance firm.
“It’s a pretty solid economic picture altogether,” he said, although job creation slowed from February’s unusually large burst of 326,000 positions.
The share of Americans who are employed or job hunting has crept up this year, too.
That’s good news to economists, who want to see the labor force participation rate return to pre-recession levels of about 66 percent. It stood at 62.9 percent in March, a slight improvement over January’s 62.7 percent.
read more: Washington Post
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