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 How To Grow Housing Market Supply In 2021. This week we’re bringing you: What Happens When Borrowers Have More Control of the Lending Process?
Mortgage Rates Barely Higher For Some; Lower For Others*
What do you get when you add a modest amount of cost to the average mortgage rate from last Friday? Rates that are still effectively right in line with all-time lows. In fact, most borrowers will not see any major differences in loan quotes between the two days. If anything, the upfront costs would be microscopically higher or the lender credit could be slightly lower.
Lenders who maintained the same loan pricing throughout the day are those doing the most to contribute to the “slightly higher” thesis. But many lenders responded to friendlier bond market conditions and made token adjustments in the middle of the day (in your favor). If we were only measuring that cohort, we’d instead be observing rates that are sideways to slightly lower versus Friday.
Mortgage Rates Holding Near All-Time Lows Ahead of The Fed*
Mortgage rates were mixed today, depending on the lender. The bond market–the driving force behind interest rate movement–was stronger yesterday. Many mortgage lenders thought it was strong enough to justify mid-day improvements in mortgage rates. Those lenders were the ones generally offering modestly higher rates today. Conversely, lenders who abstained yesterday were able to offer slightly better terms today. All told, the average lender is roughly unchanged with 30yr fixed rates that remain very close to true all-time lows.
Tomorrow brings the week’s biggest risks with important economic data in the morning and an even more important announcement from the Federal Reserve in the afternoon. Although this is a regularly scheduled Fed announcement, there’s been ample speculation about a change to the Fed’s bond-buying program. The change in question involves adjusting the balance of bond purchases in favor of longer-term debt. In other words, the Fed wouldn’t spend any more money, but they’d be buying longer-term bonds. This would have a positive effect on longer-term rates like mortgages and 10yr Treasury yields, provided the Fed pulls the trigger.
New home applications drop in November*
But year-over-year purchases up, according to survey
New home purchases in November 2020 increased 34.7% from a year ago, but new home applications decreased from October, according to the Mortgage Bankers Association builder application survey.
New home applications decreased 16% from October, said Joel Kan, MBA associate vice president of economic and industry forecasting.
“November new home sales activity, both mortgage applications, and home sales ran at a pace considerably ahead of 2019, showing the ongoing strong growth in housing demand and new residential construction,” Kan said. “Signs of a slowdown in the economic recovery likely contributed to the expected monthly decrease in activity.”
The average loan size of new homes increased from $355,684 in October to $357,554 in November, according to the survey.
New, single-family home sales were running at a seasonally adjusted annual rate of 827,000 units in November 2020, based on data from the survey. The seasonally adjusted estimate for November is a decrease of 10.8% from the October pace of 927,000 units.
On an unadjusted basis, MBA estimates that there were 59,000 new home sales in November 2020, a decrease of 15.7% from 70,000 new home sales in October.
Behavioral shopping data signals purchase intent 100 days prior to credit trigger*
The days of spamming customers are coming to an end
As interest rates continue to stay well below 3% with no end in sight, lenders are faced with consumer demand from all corners of the housing market. From refis to first-time-homebuyers in the beginning stages of their search, consumer interest has certainly been piqued by low rates and is only growing stronger.
To help lenders navigate through a sea of refis and potential purchases, fintech companies like Jornaya are adding value by providing behavioral data that informs lenders when their consumers are visiting mortgage-related websites. “With behavioral data, lenders can see which of their consumers are in-market…around 100 days prior to a credit trigger or an MLS trigger and up to 180 days before a closed loan,” said Mike Eshelman, VP of Consumer Finance at Jornaya, a 2020 Tech100 Mortgage recipient.
According to Eshelman, the use of behavioral data can tell lenders exactly which customers are actively visiting mortgage shopping sites. These behavioral shopping signals are the earliest signs available indicating a customer has started their mortgage shopping journey.
We reached out to Eshelman to learn more about how behavioral data is transforming the way lenders market to consumers and what the customer experience will look like in 2021.
HousingWire: Leveraging behavioral data has transformed marketing and consumer experiences across industries. What are some examples of the most impactful uses of behavioral data in the housing industry?
Mike Eshelman: Reaching the exact right consumer sooner with personalized messaging. With behavioral data, lenders can see which of their consumers are in-market, and how active they are shopping, around 100 days prior to a credit trigger or an MLS trigger and up to 180 days before a closed loan.
What happens when borrowers have more control of the lending process?*
FormFree’s blockchain-based exchange gives consumers access to their own ‘Financial DNA’
Through every financial transaction in a person’s life — whether a mortgage, auto, student, or personal loan — there is one constant: the borrower.
Yet borrowers have had limited agency in the lending process to date. Lenders have always controlled access to borrowers’ ability to pay (ATP) information and, by extension, the transaction as a whole. And because lenders only collect borrower data at a specific point in time — typically, during loan qualification or underwriting — their understanding of a consumer’s ATP has a limited shelf life.
FormFree, the ATP fintech led by HousingWire Tech Trendsetter Brent Chandler, is launching a blockchain-based exchange for consumers to take control of the lending process. The idea behind the distributed ledger technology, called FormFree Chain, is to provide faster close times and more choice for both loan seekers and lenders by giving consumers access to their own Financial DNA. Financial DNA is a real-time, composite view of an individual’s ATP based on asset, employment, identity, income, credit, and public records data retrieved directly from financial institutions and other authoritative sources.
Had a blockchain like FormFree’s been in place in the early days of the COVID-19 pandemic, it could have helped avert future lender losses and credit issues, according to Faith Schwartz, who led the HOPE NOW alliance during the 2008 crisis. She now leads advisory firm Housing Finance Strategies and is a member of FormFree’s board of directors.
“When the pandemic forced a shutdown of the economy, Congress gave blanket permission for any affected consumer to place their mortgage in forbearance,” Schwartz said. “Lenders had no visibility into the actual financial state of borrowers requesting forbearance, and as a result many lenders and investors found themselves bearing additional risk. In a world where borrowers provide lenders their up-to-the-minute ATP, modifications or workout solutions could be granted in a more sustainable manner that’s based on the borrower’s true financial condition.”
Finding highly affordable leads to keep sales coming in
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