Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about New Home Sales Fall To Lowest Pace In A Year. This week we’re bringing you:
Fed’s involvement in mortgage market suppresses volatility: Ironsides’ Knapp*
The S&P 500 climbed to a record high last week, fueled mostly by bank stocks. The Dow was also up more than three percent in the past week, marking its best week since mid-March. Barry Knapp, managing partner at Ironsides Macroeconomics, joined “Squawk Box” on Monday to discuss.
Ginnie Mae to Enable Securitization of Mortgage Modifications with Terms up to 40 Years*
WASHINGTON, DC — Ginnie Mae is announcing creation of a new pool type to support the securitization of modified loans with terms up to 40 years. The currently active set of pool types is limited to 30-year loan terms. The introduction of the new product (which will be known as Pool Type C-ET) will allow Ginnie Mae issuers to offer loan modifications that carry a lower monthly payment than would a 30-year term while retaining the ability to securitize the loans for sale into the secondary market.
“It’s important that Ginnie Mae issuers have secondary market liquidity for options that our agency partners determine are appropriate for supporting homeowners in distress,” said Michael Drayne, Ginnie Mae’s Acting Executive Vice President. “Because an extended term up to 40 years can be a powerful tool in reducing monthly payment obligations with the goal of home retention, we have begun work to make this security product available.“ Drayne noted that the terms and extent of use of the new pool type would ultimately be determined by the Federal Housing Administration (FHA) and Office of Public and Indian Housing (PIH) within the Department of Housing and Urban Development (HUD), Department of Veterans Affairs (VA), and U.S. Department of Agriculture (USDA) Rural Development, whose programs are the basis for the loans in Ginnie Mae pools.
Highlights of the new pool type are as follows:
• Pool of type C-ET would be a “Custom” pool, having a single loan and $25,000 minimum pool size;
• Eligible collateral will consist of participating agency modified loans whose original terms are greater than 361 months and less than or equal to 480 months, and all modifications of an included mortgage loan after its origination must have been occasioned by default or reasonably foreseeable default;
• There will not be any restrictions on loan amount, so long as the eligible collateral otherwise meets the requirements as set forth in guidance published by the participating agency.
Forbearances Show Slight Increase*
Black Knight reports that the number of loans in forbearance rose by 1,000 during the week ended June 22. The company says this was a continuation of what’s become a common trend of marginal mid-month increases. The uptick offset some of the 7,000 loan decline during the previous week, which we did not report.
The increase was in loans serviced for bank portfolios and private label security (PLS) investors. The 18,000 growth in those loans offset a reduction 10,000 in the number of GSE (Fannie Mae and Freddie Mac) loans and the removal of 7,000 being serviced for the FHA and VA. With those changes, GSE loans now total 641,000 or 2.3 percent of those portfolios. There are 836,000 forborne FHA and VA loans (6.9 percent) and 579,000 portfolio/PLS loans (4.5 percent.)
Home Price Gains Outpace Wage Growth In 72% Of U.S. Cities – but that doesn’t derail you as a homebuyer*
A new ATTOM Research report on 2Q 2021 home affordability says that home price gains have outpaced wage growth in 72% of U.S. cities. But this doesn’t derail you as a homebuyer. It’s based on averages as follows.
They calculate affordability similarly to how lenders do, which is dividing monthly payment obligations by income.
Let’s do a quick example. If your total monthly housing payments (principal, interest, taxes, insurance) are $2,300, and your total household income is $100k per year, your monthly income is $8,333. So you divide $2,300 by $8,333 to get a “debt-to-income ratio” (also called DTI by lenders) of 28%.
This is considered affordable, and 28% is the DTI that ATTOM uses for its affordability metrics. They assume 20% down on a median home price on the debt side of the calculation and use average weekly income data from the Bureau of Labor Statistics on the income side.
With this math (monthly cost on a median home price divided by average income, and keeping the result below 28%), it’s easy to come up with stats that show affordability slipping away.
This math makes clickable panic headlines, but it’s based on national averages when all real estate is hyper-local. And your loan approval is also hyper-custom to your profile.
Lenders actually allow your DTI to go up into the 40% range, sometimes higher if you have other factors like money left over in the bank after you close on a home.
You don’t have to go this high, and may not want to, but you’re allowed to, and lots of people have been doing this responsibly through full market cycles. For example, Inside Mortgage Finance reports first-time and repeat homebuyer DTIs from 2019 through 1Q 2201 are about 37% and 36%, respectively.
Finding highly affordable leads to keep sales coming in
At iLeads, we have many great solutions for mortgage LO’s at a low cost. If you’d like to see how we can help you bring in consistent sales for a great price, give us a call at (877) 245-3237!
We’re free and are taking phone-calls from 7AM to 5PM PST, Monday through Friday.
You can also schedule a call here.