While the FHFA proposed heightened liquidity requirements, committed lines of credit would not count toward fulfilling them. We hope you enjoyed last week’s edition where we talked about Highest Mortgage Rates Since 2009. This week we’re bringing you:
With a housing market in transition, originators are looking to seize profitable opportunities that benefit both borrowers and their own bottom lines. HousingWire recently spoke to Jonathan Scarpati, Senior Vice President of Wholesale Lending at Finance of America Reverse, about tapping into the reverse mortgage market in light of the changing market.
HousingWire: With interest rates gradually rising and refinance volume on the decline, how can originators benefit from adding reverse mortgages to their product mix?
John Scarpati: Reverse mortgages add diversity to the loan offering of originators during the current economic climate, but the benefits that make reverse mortgages such a valuable product addition aren’t only driven by interest rates or current macroeconomic trends. Of course, it is helpful right now that reverse mortgages are not interest-rate-sensitive loans in an environment where forward mortgages will undoubtedly feel the sting of rising interest rates and lower refi volume. But originators need to see the big picture that extends beyond our current economic climate—the market for reverse mortgages is enormous and growing. Ten thousand baby boomers reach retirement age every day, and that number is expected to double over the next several decades. By 2050, 20% of Americans will be 65 or older. And they’re sitting on an estimated $10 trillion in home equity. That equity can be leveraged to help people live better lives, starting at age 55 in some states for certain products and throughout their retirement.
It’s also essential for originators to understand that reverse mortgages are not loans of last resort. This may be contrary to how what they’ve heard. Increasingly, financial professionals are viewing reverse mortgages as strategic tools to be used as part of a comprehensive retirement plan. New research has even shown that reverse mortgages can be used to reduce market risk and increase portfolio growth. More and more financial and wealth advisors are going to be looking to reverse mortgages—and reverse mortgage originators—as they advise their clients. So, adding reverse just makes good business sense.
Interest in sustainable homes, those with green or energy-saving features, appears to be growing. The National Association of Realtors® (NAR) recently surveyed its members to determine the emphasis their clients place on such attributes in their homebuying decision making.
Roughly half of Realtors who responded said they have participated in the sale of a home with green features, a substantial change from the 32 percent who said this in last year’s survey. Sixty-three percent thought promoting the presence of such features in the listing was at least somewhat valuable.
Promoting green features might be problematic, however. Fifty-six percent of respondents were unaware if such fields were present in their local MLS listings. Of the 35 percent who said they were; nearly half said they did not use them.
During the market disruption in March 2020, the value of mortgage servicing rights became temporarily disconnected from mortgage rates.
Large mortgage sellers and servicers faced severe margin calls, and it took several weeks for them to get the go-ahead from the Federal Housing Finance Agency to draw on their liquidity buffers.
It’s a scenario that large nonbanks are hoping not to repeat.
“The point of [FHFA] asking them to have that liquidity is to make them more resilient in a stressful environment. The point of building up liquidity is to be able to use it,” said Ed DeMarco, president of the Housing Policy Council, which reps large nonbank mortgage lenders and servicers.
Industry stakeholders took to a virtual forum Monday afternoon to share their thoughts on proposed tweaks to criteria for Fannie Mae and Freddie Mac sellers and servicers, as well as a 2021 proposal by Ginnie Mae for its issuers.
Participants took it as a good sign that Ginnie Mae and the Federal Housing Finance Agency jointly hosted the event. The Conference of State Bank Supervisors — which regulates nonbanks at the state level — also participated in the session.
The FHFA proposed the raft of changes for GSE sellers and servicers in February. As conservator of the government-sponsored enterprises, FHFA does not regulate mortgage lenders. Its proposed criteria for Fannie Mae and Freddie Mac’s counterparties, however, would determine how they manage risk. Ginnie Mae issued its own proposed guidelines for its issuers in July 2021, but has not implemented them.
The FHFA proposed an additional liquidity buffer for large non-banks, which it said they could use “in times of financial or economic stress.” The Housing Policy Council asked FHFA to clarify exactly when those buffers could be used, and how they would be re-capitalized after the stressful event ends.
Finding highly affordable leads to keep sales coming in
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