11-30-15 2016 maximum conforming loan limits established for fannie mae …€¦ · ·...
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2016 Maximum Conforming Loan Limits Established for Fannie Mae and Freddie Mac
National Baseline Loan Limit Remains Unchanged; Limits Rise for 39 High-Cost Areas
Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced that the
maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in
2016 will remain at existing levels, except in39 high-cost counties where they will increase. In
most of the country, the loan limit will remain at $417,000 for one-unit properties.
The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit at
$417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise
again until home prices return to pre-decline levels. The $417,000 loan limit will stay the same
for 2016 because FHFA has determined that the average U.S. home value in the third quarter of
this year remained below its level in the third quarter of 2007.
HERA provides for higher loan limits in high-cost counties by setting loan limits as a function of
area median home value. Although the baseline loan limit will be unchanged in most of the
country, 39 specific high-cost counties in which home values increased over the last year will
see the maximum conforming loan limit for 2016 adjusted upward. Although other counties also
experienced home value increases in 2015, after other elements of the HERA formula—such as
the statutory ceiling and floor on limits—were accounted for, these local-area limits were left
unchanged.
A list of the 2016 maximum conforming loan limits for all counties and county-equivalent areas
in the country may be found here. A description of the methodology used for determining the
maximum loan limits can be found in the attached addendum.
Questions concerning the maximum conforming loan limits can be addressed to
Addendum: Calculation of 2016 Maximum Conforming Loan Limits Under HERA
Fannie Mae joins e‐document revolution
Partners with DocuSign, will offer e‐signatures for several documents
The government‐sponsored enterprise announced that it is partnering with DocuSign to provide an
“easy, fast, and secure way” to execute agreements with Fannie Mae by allowing electronic signatures
on several of its documents.
The new e‐document process will also allow for the electronic tracking and handling of documents,
Fannie Mae said.
Fannie Mae made the announcement in an email on Tuesday sent to lenders and servicers.
According to Fannie Mae, the new e‐signature process will roll out in early December.
In its initial phase, Fannie Mae will implement e‐signatures for its lender master agreements, master
selling and servicing contracts, and “certain custodial documents.”
Fannie Mae said that other documents “may be impacted” at a later date.
According to Fannie Mae, the DocuSign software is “intuitive and simple to use and automatically walks
the user through the process,” with no training required.
In the email to lenders and servicers, Fannie Mae also included an infographic that explains the new
process, and how it “improves operational efficiency for all parties.”
On the infographic, which can be seen here, Fannie Mae says that in the “old way” of signing
documents, there were 11 steps to signing documents, involving multiple e‐mails, printing documents,
signing documents by hand, scanning those same documents, and re‐emailing them.
According to Fannie Mae, the new process is reduced to four steps, all of which are done electronically.
With the new process, it is, in the words of Fannie Mae, “Click. Sign. Done.”
Click here to see the infographic from Fannie Mae on the new e‐signature process.
http://www.housingwire.com/ext/resources/files/Editorial/Documents/esignature.pdf
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Moody's Report Predicts Stable Outlook for State HFAs in 2016
Last week, Moody's Investors Service (Moody's) released a report predicting a stable financial outlook in
2016 for state HFAs. The report concludes that the continued growth of state HFAs median margins (net
revenue/total revenue) and strong loan production indicates a stable outlook for fiscal year (FY) 2016.
Moody's says HFAs must begin to rebuild their balance sheets by adding more mortgage loan assets to
their portfolios to achieve a positive outlook.
In FY 2014, HFAs' median margins reached a post‐crisis high, surpassing 12 percent. Moody's predicts
this upward trend will continue in FYs 2015 and 2016. According to the report, while the trend will
continue, median margins will not surpass 15 percent because short‐term interest rates will not have an
impact until later in FY 2016. The report places an emphasis on HFAs' margins, explaining that margins
between 10 and 15 percent support a stable sector outlook, while margins over 15 percent can indicate
a positive outlook, and margins under 10 percent could drive a negative outlook.
The report also stresses the importance of HFAs' strong loan production in 2014 and 2015 as a
contributing factor to the sector's stable outlook. State HFAs' loan production is expected to grow to
$11.5 billion by the end of calendar year (CY) 2015, up from $9.7 billion in CY 2014. Moody's attributes
the loan production growth to the loan sales HFAs are conducting on the secondary market. Secondary
market loans sales accounted for 75 percent of new originations in 2014 and is on pace for the same
percentage in 2015, according to the report. Moody's predicts that HFA loan originations will continue
to increase in 2016 and 2017 as millennials enter the housing market, spurred on by lower
unemployment and wage growth.
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Despite the stable outlook presented in the report, Moody's believes there is a way HFAs can improve
their outlook to positive. As HFAs are utilizing the secondary market more than ever to facilitate loan
sales, they will become increasingly exposed to the short‐term revenue volatility of receiving revenue
only at the time of the sale. Under this method of financing, according to Moody's, even a slowdown in
originations for one month could have a large impact on HFA revenues. To insulate themselves from the
volatility of the secondary market financing method, Moody's recommends HFAs retain more whole
loans and mortgage‐backed securities (MBS) in their portfolios.
To purchase the report, please click here.
https://www.moodys.com/research/Moodys‐US‐state‐housing‐finance‐agency‐sector‐outlook‐remains‐
stable‐‐PR_339511
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Quicken Loans debuts 8‐minute mortgages, without humans
Detroit‐based Quicken Loans has unveiled a new self‐service website aimed at speeding up the
mortgage approval process and cutting down the need to talk with a human loan officer.
The new Rocket Mortgage website allows prospective borrowers to start and finish a mortgage
application entirely online and get approved in as little as eight minutes, the company said last week. A
pioneer in Internet‐based mortgage lending, Quicken Loans has traditionally let borrowers begin their
application process online and get loan quotes, but it still required a call at some point with a live
Quicken employee.
"This is a massive sea change in the home‐lending world," said Dan Gilbert, founder and chairman of
Quicken Loans. "I'm not aware of any other lender where you can apply for your mortgage, look up your
interest rate, become automatically approved and have interfaces into assets, income and property
values" all online, he said.
Rocket Mortgage has faster approval times because Quicken now has the ability to verify through third‐
party sources a borrower's assets, property and income information, therefore eliminating the need for
borrowers to manually provide supporting documents, the company said.
"What most other businesses have done is they just slap a paper application onto a screen and you fill
out your information and they call you," Gilbert said. "This is the complete opposite of that."
Quicken says the majority of its loans currently close in 30 days or less, and Rocket Mortgage users can
shave as much as a week off that timeframe.
The Rocket Mortgage website works on tablets and smart phones as well.
"So if you want to refinance and you're standing in line at Starbucks, you can see what your options
are," said Regis Hadiaris, Rocket Mortgage's product lead.
Quicken Loans President Jay Farner said faster approval time doesn't mean Quicken has loosened its
lending standards or is making riskier loans.
"We're not changing the documentation required for a mortgage, we're changing how we collect the
information," Farner said. "If anything it makes the loan a better quality loan — it doesn't affect the
quality in a negative fashion in any way."
Quicken officials also emphasized that the company is keeping its call center and that Rocket Mortgage
customers always have the option to press a button and speak with a loan officer. The percentage of
borrowers who can complete the loan process all online without phone assistance should increase as
the new system matures.
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Quicken spokesman Chris Smith said the self‐service mortgage model does not endanger the jobs of
Quicken's many loan officers. Numerous variables are involved in qualifying for a mortgage, so Quicken
will still need employees on hand to answer questions, the company said.
"It will actually increase the number of people that our mortgage bankers are speaking with," Farner
said of Rocket Mortgage.
While Quicken Loans is believed to be the first large mortgage lender to fully automate its online loan
process, a small San Francisco‐based startup called Lenda has had a similar all‐online platform since fall
2013, although only for refinancings and not new mortgages.
Lenda's CEO Jason van den Brand said he believes that all‐online lending is the future.
"I think that the vast majority of people, given the demographic shift that's occurring in our country, will
want to originate their loan online," van den Brand said. "There were some other people who tried this
in the past, but I just don't think the technology was ready, and definitely not consumer behavior."
Quicken said Rocket Mortgage was a three‐year development project involving 500 Quicken team
members.
It is different from Quicken's recently formed Rocket Loans company, also known as RockLoans
Marketplace, that was highlighted by the Free Press earlier this month amid speculation that Quicken
could be branching into personal and small‐business loans.
Asked about Rocket Loans, Farner said he can't comment on speculation.
Quicken is a non‐bank lender that has ranked as the No. 2 originator in the nation for direct‐to‐
consumer mortgage lending. Quicken borrows money through a "warehouse" line of credit to make
mortgage loans that it then sells in the secondary market.
FHA's Capital Ratio Returns to Statutorily Required
Earlier today, HUD released its 2015 Annual Report to Congress on the Financial Status of the Federal
Housing Administration's (FHA) Mutual Mortgage Insurance Fund (MMIF). The report finds that the
MMIF, which funds FHA's single‐family and reverse mortgage programs, has a capital ratio of 2.07
percent, slightly above the statutory minimum ratio of 2 percent. This is the first time the MMIF has met
its minimum capital ratio since 2009.
According to the report, the MMIF began fiscal year (FY) 2015 with a net value of $24 billion, an increase
of nearly $19 billion over the beginning of FY 2014. In FYs 2012 and 2013, due to losses caused by the
financial crisis, the MMIF ran a negative balance. In September 2013, HUD was forced to request funding
from the U.S. Treasury Department to keep it actuarilly solvent. In FY 2014, the MMIF returned to a
positive balance, but its capital ratio was at only .41 percent.
It is important to note that, even when it had to request funds from the Treasury, the MMIF was not
actually in debt. Rather, it did not have enough value to meet more stringent congressionally mandated
standards. Federal law requires FHA to have enough reserves to cover 100 percent of its anticipated
losses over the next 30 years. Consequently, when the report says that the MMIF has an economic value
of $19 billion, it is referring to the amount of money the report projects would be remaining in the fund
if FHA was forced to pay off all of its projected losses in the next 30 years. When HUD was forced
request $1.7 billion from Treasury in 2013, to restore its economic balance, the MMIF actually held over
$30 billion in reserves.
HUD says a number of recent FHA policies helped restore MMIF’s value, including establishing a
minimum down payment of ten percent for borrowers with credit scores below 580, higher minimum
net worth standards for participating lenders, new loss mitigation protocols, and procedures for selling
delinquent loans to investors to reduce FHA’s losses.
The report also credits HUD’s decision in January to lower the annual mortgage insurance premium for
new FHA loans by 50 basis points with helping to grow the MMIF while also allowing it to better assist
underserved borrowers. The premium reduction contributed a 42 percent increase in FHA loan volume,
the report finds, including a 27 percent increase in purchase loans. The reduction also allowed FHA to
insure loans for 75,000 borrowers in FY 2015 with credit scores below 680.
FHA also released a comprehensive summary of the report’s findings.
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House votes to revamp Qualified Mortgage rules
Presidential veto is looming
The House of Representatives voted Wednesday to change the definition of “Qualified Mortgage,”
opening the door to a potentially seismic change in the mortgage lending landscape.
By a vote of 255‐174, the House approved the “Portfolio Lending and Mortgage Access Act,” which
would broaden the definition of qualified mortgages – those that qualify for the safe harbor – to include
all mortgages held on a lender's balance sheet.
The new QM rule would recognize all residential mortgage loans held in portfolio by credit unions and
other lenders as qualified mortgages for the purposes of the Consumer Financial Protection Bureau’s
mortgage lending rules.
The current QM rules require a lender to make a good faith effort to determine that a borrower has the
ability to repay a mortgage, and that the loan does not include excessive upfront points and fees.
The QM also contains special provisions and exemptions that are available only to small lenders or to
small lenders that operate predominantly in rural or underserved areas.
But the Portfolio Lending and Mortgage Access Act would change those rules, but despite passing by a
comfortable margin in the House, the likelihood of the Portfolio Lending and Mortgage Access Act being
enacted as a law is slim, due to the threat of veto from the White House.
In a statement issued Tuesday, the White House said that the Portfolio Lending and Mortgage Access
Act “would open the door to risky lending by allowing balloon loans made in any geographic area to
qualify for the safe harbor as long as they are held in portfolio.”
Under the bill, depository institutions that hold a loan in portfolio would receive a legal safe harbor
even if the loan contains terms and features that are abusive and harmful to consumers. The bill would
limit the right of borrowers to file claims against holders of such loans and against mortgage originators
who directed them to the loans, the White House said.
“The Administration strongly opposes this bill because it would undermine critical consumer
protections by exempting all depository financial institutions, large and small, from QM standards—
including very basic standards like verifying a consumer's income—as long as the mortgage loans in
question are held in portfolio by the institution,” the White House said in a statement.
“This bill would undermine the essential protections provided under the Qualified Mortgage rule,” the
White House continued. “The Congressional Budget Office estimates that the mortgages offered legal
protections under the bill would likely default at a greater rate than the qualified mortgages with
current legal protections. For these reasons, if the President were presented with H.R. 1210, his senior
advisors would recommend that he veto the bill.”
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The Portfolio Lending and Mortgage Access Act was introduced earlier this year by Rep. Andy Barr, R‐Ky.,
and passed out of the House Financial Services Committee in July by a 38‐18 margin.
One of the bill’s main supporters, House Financial Services Committee Chairman Jeb Hensarling, R‐
Texas, said that the CFPB’s rules make it harder to lend to “credit‐worthy” Americans.
“The Independent Community Bankers Association reports that 73% of community bankers have
decreased their mortgage business or completely stopped providing mortgage loans due to the expense
of complying with this regulatory burden,” Hensarling said in a statement.
“One‐out‐of‐five Americans who borrowed to buy a home just five years ago will not meet the
underwriting requirements of the CFPB’s mortgage rules. According to the Federal Reserve, that will hit
roughly one‐third of Hispanic and African‐American borrowers,” Hensarling continued.
“In order to ensure that community financial institutions are able to continue providing mortgage credit
to consumers, H.R. 1210 provides a common sense, flexible approach that allows residential mortgage
loans held in portfolio to qualify for a safe harbor equivalent to that of the CFPB’s Qualified Mortgage
rule,” Hensarling said.
“H.R. 1210 will allow these financial institutions to meet the credit demands of consumers, while
incentivizing that banks and credit unions ensure the borrower can meet the monthly obligations of a
mortgage,” Hensarling continued.
“It should not be the job of Congress or unelected and unaccountable Washington regulators to decide
who gets a mortgage and who does not, or to force community banks and credit unions to function like
regulated utilities, issuing only plain‐vanilla mortgages rubber‐stamped in Washington,” Hensarling said.
“This common sense legislation recognizes that the most effective way to ensure that a borrower has
the ability to repay is not a one‐size‐fits‐all, top‐down regulation from Washington that mandates the
terms of loans and underwriting practices.”
The passage of H.R. 1210 was welcomed by the American Bankers Association, who said that the
change to the QM rules would allow its members to expand lending operations.
“We applaud members of the House for passing the Portfolio Lending and Mortgage Access Act,
legislation introduced by Rep. Andy Barr that would expand access to mortgage credit by treating loans
originated by a bank and held in portfolio as Qualified Mortgages,” James Ballentine, ABA’s executive
vice president of congressional relations and political affairs, said.
“This important measure, which received bipartisan support, will help many creditworthy borrowers
access safe, traditional credit that would otherwise be out of reach,” Ballentine continued.
“It’s clear that new regulatory requirements have restrained mortgage lending, and have made it
particularly difficult for some creditworthy borrowers to obtain a home loan,” Ballentine said.
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“This legislation is a common‐sense approach that will help borrowers gain access to some of the lowest
risk mortgage products offered by banks,” Balentine said. “Loans held in portfolio are well underwritten
and conservative by their very nature ‐‐ banks hold only the safest loans in portfolio. There is no need to
create additional barriers for creditworthy borrowers for loans held in a bank’s portfolio.”
Unsurprisingly, across the aisle from Hensarling, Rep. Maxine Waters, D‐CA, the Ranking Member of the
Committee on Financial Services, said that the entire vote was a “waste of time” due to the threat of the
Presidential veto.
“H.R. 1210 would allow lenders to deal in the same kind of risky loans that sank Washington Mutual,
Wachovia, Countrywide and eventually the entire economy in 2008,” Waters said in a statement.
“The bill undermines the anti‐predatory lending provisions of the Dodd‐Frank Act and virtually
eliminates one of the most significant consumer protection rules implemented by the CFPB,” Waters
continued.
“The bill also revives an industry practice under which mortgage brokers can earn hefty bonuses by
steering borrowers into riskier, more expensive loans regardless of whether they qualify for better
rates,” Waters said.
“My colleagues seem to forget that we went through a terrible financial crisis. While we did spend
hundreds of billions of dollars to rescue the banking system, millions of victims of predatory lending
were left to fend from themselves as they were displaced from their homes and saw their life’s savings
disappear,” Waters said.
“It’s time for Republicans to realize that Dodd‐Frank and the CFPB are not the problem, they are the
solution,” Waters said. “The CFPB has recovered $11 billion in consumer relief for 25 million Americans.
It is both a fierce consumer advocate and a fair regulator whose leadership has been praised by many in
the banking industry. The CFPB is the kind of government success story Republicans can’t bring
themselves to believe is possible.”
HUD Publishes 2016 QCTS and DDAs Using New Small Area DDA Methodology
Today, HUD published on its website the 2016 Difficult Development Areas (DDAs) and Qualified Census
Tracts (QCTs), which are eligible for the 30 percent basis boost under the Housing Credit program. As
HUD has long planned, the methodology for determining 2016 metropolitan DDAs relies on new Small
Area Fair Market Rents, and thus result in 311 zip code level small area metropolitan DDAs across 45
states, the District of Columbia, and Puerto Rico. This compares to 35 full metropolitan statistical areas
in 11 states plus Puerto Rico that HUD designated as DDAs in 2015.
While in most years new DDAs and QCTs become effective on January 1, because of the change in DDA
methodology, HUD is postponing the effective date of both 2016 QCTs and DDAs until July 1, 2016. This
means that projects located in an area that was a DDA in 2015, but will lose its DDA status in 2016, are
still eligible for the basis boost so long as the state agency receives the complete project application
from the developer by June 30, 2016.
The HUD notice also extends the period during which the 2016 DDAs will be effective from 365 days to
730 days. For example, if a project is located in a 2016 DDA that loses its DDA status in 2017, the project
will be eligible for the basis boost so long as the complete application is filed by December 31, 2016 and
the state agency allocates Credits to the project within 730 days from the date the applicant submitted
the application or, in the case of Housing Credit properties financed with bonds, the state agency issues
bonds and the project is placed in service within 730 days after the applicant submits its completed
application. The HUD notice provides various example scenarios illustrating when the 2016 DDAs are
applicable to better explain how this will work in practice.
HUD has told NCSHA that it expects to return to a January 1 effective date in 2017 and future years.
For more information, contact NCSHA’s Jennifer Schwartz.
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Most Renters Carry Debt Each Month, Downpayments on a Home Not a Top Priority
•Gen Xers more likely than Millennials or Boomers to buy a home
•Millennials more likely to save for short‐ and long‐term goals
•Renters offset rent hikes by spending less on essentials and are considering getting a roommate
Renters indicate they still feel challenged with their finances and 66 percent are carrying debt each
month, according to a recent Freddie Mac (OTCQB: FMCC) survey. Yet, the majority of renters (56
percent) are optimistic about managing their debt. Renters are also saving money for numerous
priorities and a down payment on a home is not at the top of their list. In addition, Gen Xers are more
likely than Millennials or Boomers to buy a home in the next three years.
For the Freddie Mac quarterly online survey, conducted in October on its behalf by Harris Poll, renters
currently saving for all listed goals place a higher priority on saving money for an
emergency/unexpected expense (59 percent), retirement (51 percent) and children's education (50
percent) than a down payment on a home (39 percent) or a vacation (26 percent). They also indicate
that they are behind in saving for those things.
Looking across generations, Millennial renters are more likely to be saving for short‐ and long‐term goals
than Boomer and Gen X renters. For example, Millennial renters are more likely to be saving for a major
purchase (92 percent) and a vacation (94 percent), when compared to Boomers (82 percent and 81
percent respectively) and Gen Xers (77 percent and 75 percent respectively).
"We know rents are rising faster than incomes and now we have data to show that many renters don't
have enough to pay all their debts each month, which is forcing them to make tradeoffs, such as cutting
spending on other items," said David Brickman, Freddie Mac executive vice president of Multifamily.
"Despite this, some renters feel optimistic about managing their debt."
Brickman added, "Growth in the renter segment will most likely occur through multifamily properties as
more than half of those currently renting single‐family properties are planning to become homeowners
in the near future. The data shows single‐family renters are increasingly more dissatisfied than
multifamily renters."
Ways to Offset a Rent Hike
The many ways in which renters are making adjustments due to rent increases include:
•51 percent are spending less on essentials, the same as last quarter.
•52 percent put off plans to purchase a home, compared to 44 percent in June.
•35 percent are contemplating getting a roommate, up from 29 percent in June.
•26 percent say they need to move into a smaller rental property, compared to 20 percent in June.
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The Future Homebuyer
When broken out by generations, 58 percent of Gen X renters expect to purchase a home in the next
three years, compared to 42 percent of Millennials and 33 percent of Baby Boomers.
Overall, almost half (48 percent) of renters in single‐family properties are dissatisfied with renting, and
are more likely to purchase a home in the next three years than multifamily renters (57 percent vs. 28
percent).
Satisfaction with Rental Experience
The satisfaction rates from the March, October and June surveys this year are virtually unchanged, with
a third of renters being very satisfied with their rental experience and almost a third (30 percent)
indicating they are moderately satisfied. In the October survey,
•70 percent of satisfied renters are likely to continue renting for the next three years, up slightly from
68 percent in the previous quarter.
•30 percent of satisfied renters indicate they are more likely to buy a home, compared to 32 percent in
the previous quarter.
In addition, the top favorable factors for renting remain about the same and are freedom from home
maintenance (79 percent), more flexibility over where you live (74 percent) and protection against
declines in home prices (68 percent).
[Survey] Here’s proof digital mortgages are the future of lending
J.D. Power survey shows customer satisfaction is better
Mortgage customer satisfaction is better thanks to heightened focus from lenders on developing
functional digital channels and improving operation efficiency.
And the lenders that does this best: Quicken Loans.
J.D. Power published the results of its latest U.S. Primary Mortgage Origination Satisfaction Study, which
is based on responses from 4,666 customers who originated a new mortgage or refinanced within the
past 12 months.
The study measures customer satisfaction with the mortgage origination experience in six factors:
application/approval process, interaction, loan closing, loan offerings, onboarding and problem
resolution.
The study was fielded in two waves: February – March and July – August 2015.
Starting with the overall picture, customer satisfaction with mortgage origination increased 7 points
from 2014 to an average of 793 in 2015.
The rise primarily driven by a 22‐point gain in the application and approval process factor, influenced by
improved perceptions of the speed of the loan process.
According to the results, when loans close earlier than promised, satisfaction is significantly higher
(866), compared to when loans close as expected (821) and when it takes longer than expected (658).
Plus, the study found that overall satisfaction with several mortgage application‐related activities, such
as completing an application (799), submitting documents (804) and receiving status updates (811) was
markedly higher among customers who used digital communication channels versus those who
communicated via mail and fax (753, 766, and 770, respectively).
“While a lot of effort has been placed on ensuring compliance with new regulations, it is imperative that
lenders improve their education and communication about the impact of these changes or risk losing
customers,” said Craig Martin, director of the mortgage practice at J.D. Power.
“Effective communication remains one of the most important aspects of a satisfying mortgage
experience, especially if the process is taking longer than it has historically. As the number of Millennial
homebuyers continues to rise, lenders must be ready to meet their expectations. This generation is
highly digitally connected, so ongoing communication and transparency via the channels they prefer,
particularly mobile, are vital.”
HousingWire recently held a webinar on how to reach the Millennial first‐time homebuyer, emphasizing
that they want a digital mortgage.
In addition to this, even the government is pushing the mortgage market to go more online. The
Consumer Financial Protection Bureau’s new TILA/RESPA Integrated Disclosure rule is just one example
of this.
However, the survey said that one side effect of the new TRID rule is that mortgage lenders are under
increased pressure from new loan disclosure regulations that could increase the time it takes to get a
home loan while also facing increased competition from non‐traditional lenders.
“This law has the potential to increase the mortgage timeline which poses a significant challenge for
lenders when serving home buyers across all generations, but could be particularly challenging when
dealing with Millennials who are technically savvy, always connected to the Internet and noted as being
capricious consumers,” the survey stated.
And longer timelines equal lower satisfaction, with satisfaction falling to 686 when the loan process
takes more than two months. But when an accurate time frame estimate and proactive updates are
provided in that same scenario, satisfaction is 859, showing the importance of commination throughout
the loan process.
However, loans are closing sooner, with the percentage of applications and approvals that close earlier
than promised increasing to 35% in 2015 from 31% in 2014.
Additionally, nearly 4 in 10 (37%) millennial customers indicated that the origination process was not
completely explained to them, and 58% indicated that their options, terms and fees were not
completely explained.
The survey found that effective loan representatives are vital, citing that those loan reps who engage
customers, build trust and ensure that borrowers understand each step of the process can mitigate the
negative impact on satisfaction due to missing closing dates (764 missed date/effective representative
vs. 511 missed date/ineffective representative).
As far as which lender does this properly, Quicken Loans once again ranked highest in primary mortgage
origination satisfaction for the sixth consecutive year, with a score of 850, an increase of 15 points from
2014. Quicken Loans performs particularly well in all six factors.
J.D. Power also announced back in July that for the second year in a row, Quicken Loans had the most
satisfied customers of any mortgage servicer.
Here’s chart of the overall rankings.
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RealtyTrac: Foreclosure starts post highest jump in more than four years
Should the industry be concerned?
Foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on
115,134 U.S. properties in October, up 6% from the previous month. This is still down 6% from a year
ago, the latest RealtyTrac Foreclosure Market Report for October 2015 showed.
The rise was caused primarily by a 12% monthly jump in foreclosure starts, with 48,605 properties
starting the foreclosure process for the first time in October.
This increase marks the largest month‐over‐month increase since August 2011, when there was a 24%
month‐over‐month increase. Despite the month‐over‐month increase, foreclosure starts in October
were still down 14% from a year ago.
While this increase isn’t a giant surprise, it did exceed expectations.
“We’ve seen a seasonal increase in foreclosure starts in October for the past five consecutive years, so
it’s not too surprising to see the monthly increase this October,” said Daren Blomquist, vice president at
RealtyTrac.
“However, the 12% increase this October is more than double the average 5% monthly increase in the
past five Octobers, and the even more dramatic monthly increases in some states is certainly a concern.
The upward trend in foreclosure starts in those states in some cases could be an indication of fissures in
economic fundamentals driving more distress and in other cases is more likely an indication of long‐term
delinquencies finally entering the foreclosure pipeline,” he added.
Broken up, October foreclosure starts increased from the previous month in 34 states, including
California (up 21%), Florida (up 13%), New Jersey (up 15%), Illinois (up 20%), Maryland (up 300%),
Washington (up 34%), and Michigan (up 37%).
Meanwhile, Maryland, New Jersey, Florida, Nevada and Illinois posted the highest state foreclosure
rates.
Maryland posted a total of 5,126 foreclosure filings in October, up 100% from the previous month, but
still down 14% from a year ago. For the first time this year, Maryland’s foreclosure rate jumped to the
top spot in October thanks to the surge in foreclosure starts. One in every 466 Maryland housing units
had a foreclosure filing in October, more than 2.5 times the national foreclosure rate.
New Jersey accounted for 7,559 properties receiving a foreclosure filing in October, a foreclosure rate
of one in every 471 housing units. While the state’s foreclosure activity is down 4% from the previous
month, it is still up 87% from a year ago.
Recently, Sens. Cory Booker, D‐NJ, and Robert Menendez, D‐NJ, sent a letter to the heads of the
Department of Housing and Urban Development, the Federal Reserve Board, the Consumer Financial
Protection Bureau, the Federal Housing Finance Agency and others, saying that the prevalence of
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zombie foreclosures in the state is seriously impacting the state’s residents and its economy, and they
want to know what the federal regulators are going to do about it.
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Virginia is the First State in the Nation to Functionally End Veteran Homelessness
~Governor McAuliffe Announces More than 1,400 veterans housed in the past year~
RICHMOND – Today Governor Terry McAuliffe announced that Virginia has been certified by the United
States Interagency Council on Homelessness, the U.S. Department of Housing and Urban Development,
and the US Department of Veterans Affairs as the first state in the nation to functionally end veteran
homelessness. Speaking at a Veterans Day ceremony at the Virginia War Memorial alongside U.S.
Secretary of Housing and Urban Development Julián Castro, Governor McAuliffe declared that Virginia
has housed 1,432 homeless veterans since October 2014.
“On a day when we remember those who fought and died for our nation, I am proud to proclaim that
Virginia is leading the way in the fight to end veteran homelessness,” said Governor McAuliffe. “This is
an important victory in our ongoing efforts to make our Commonwealth the best place on earth for
veterans to live, work and raise a family. However, we must remain committed to keeping homelessness
among veterans, and, all Virginians, rare, brief and non‐recurring. This successful effort will serve as the
launching pad for our next goal of functionally ending chronic homelessness among all Virginians by the
end of 2017.”
The announcement is the culmination of efforts that began when Governor McAuliffe committed
Virginia to First Lady Michelle Obama’s Mayor’s Challenge to End Veteran Homelessness in June 2014
and pledged to end veteran homelessness by the end of 2015.
Since signing on, 20 mayors and county chairs throughout Virginia have publicly declared their
commitment to achieving the goals of the Mayor’s Challenge, and communities throughout Virginia
have successfully housed veterans through two consecutive 100 Day Challenges in partnership with
Community Solutions and the Rapid Results Institute.
Communities throughout Virginia have made vast improvements in their homelessness response and
housing assistance systems. By using evidenced‐based tools for triaging the needs of identified veterans,
making both rapid re‐housing and permanent supportive housing resources available, as well as
incorporating the principles of Housing First throughout the entire spectrum of housing assistance for a
veteran, these systems have been streamlined to help a veteran experiencing homelessness to quickly
secure permanent housing.
The availability and provision of supportive services to help veterans maintain stability within their new
homes have been equally critical in this effort. By implementing efficient homelessness response
systems across the state, Virginia has ensured that any veteran’s experience with homelessness either
now or in the future will be rare, brief, and non‐recurring.
The effort to end Virginia homelessness relied on partnerships with regional Veterans Affairs Medical
Centers, local housing continua of care (CoC) providers, Supportive Services for Veterans Families (SSVF)
programs and local public housing authorities. The increased level of communication and collaboration
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at the state level among such partners as the Virginia Department of Veterans Services, Virginia
Coalition to End Homelessness, Virginia Department of Housing and Community Development, Virginia
Housing Development Authority, Governor’s Coordinating Council on Homelessness.
Key federal partners included: the Department of Housing and Urban Development (HUD), Department
of Veterans Affairs (VA), and Department of Labor (DOL).
“Virginia is grateful to have such collaborative relationships with our community based, state and
federal level partners,” said John Harvey, Secretary of Veterans and Defense Affairs. “We must remain
committed to effectively and freely communicating and collaborating in order to keep our veterans
homelessness response and housing assistance systems fully functional and sustainable over the long
haul”.
Additionally, by engaging with non‐traditional partners, such as Dominion Virginia Power and
Appalachian Power Company, Virginia is continuing to expand the depth of the supportive networks in
place to help veterans to continue living in their homes.
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Freddie Mac issues credit-scam warning to potential homeowners
November 6, 2015
For many consumers, the prospect of buying a home can be daunting. There are various factors that go
into a lender’s decision whether to extend credit or not, and a buyer, especially one with some credit
issues, has to make sure that their loan application is as red-flag-free as possible.
That places many potential borrowers at risk for scammers who offer quick fixes to the buyer’s credit.
And, there are 3 ways they do it.
In an effort to protect as many potential homeowners as possible, Freddie Mac is issuing a warning to
buyers and lenders about scams that offer the promise of a raised credit score in exchange for money.
“Who doesn't want the highest credit score possible to garner the most-favored terms?,” Freddie Mac
writes on its website.
“For many Americans with consumer credit negatively impacted by the housing crisis and fluctuating
economy, it's easy to be lured by the promise of a raised credit score,” Freddie Mac continues.
“Schemes that falsely raise credit scores will land borrowers in scalding hot water - as well as cost you
time and money combating both origination- and servicing-related fraud.”
Freddie Mac said that consumers, as well as those in the mortgage industry, need to be on the lookout
for any person of credit repair service that offers “help” with one of three types of common fraud
schemes that promise an increased credit score, including:
1. Disputing credit with credit bureaus
Freddie Mac cites the new program from FICO (FICO), which is geared to assist approximately 1 million
consumers annually that are in need of more credit and financial guidance.
The new program titled, FICO Score Open Access for Credit & Financial Counseling, was designed to aid
consumers who have credit management problems by providing FICO Scores along with credit education
material that helps consumers understand credit scoring and learn about responsible financial health
management.
Freddie Mac said that while this program is good for borrowers, it presents fraudsters with an
opportunity to game the system and take advantage of borrowers.
“(Scammers) may direct a borrower to contact credit repositories repeatedly to dispute previously
defaulted debt.” Freddie Mac writes. “The fraudster hopes the creditor will miss responding to one of
the disputes and the defaulted debt will disappear temporarily, triggering a jump in the borrower's
credit score. The borrower may qualify for - and close on - a new mortgage before the credit report
correctly reflects the defaulted debt and the borrower's true credit score.”
2. Falsely claiming identity theft
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Freddie Mac warns that some companies may encourage consumer to falsely claim identity theft on
their loan application in an attempt to have debt removed from their credit report.
“Some borrowers who falsely claimed identify theft have gone as far as providing affidavits of identity
theft and police reports,” Freddie Mac writes. “Of course, lenders take these claims seriously and
investigate. In some instances, they discover that the ‘police report’ is fake, never actually filed, or from
a police department that doesn’t exist.”
Freddie Mac tells lenders to remind their borrowers that falsely claiming someone stole their identity is
as bad as stealing someone else's identity.
3. Misusing credit protection numbers
Freddie Mac warns that using a credit privacy number, which is an alternative for a Social Security
number most commonly used by borrowers in the public eye, such as celebrities and politicians to mask
previous credit issues is dangerous.
“Some consumers with poor credit acquire a CPN with the intent of creating a new, clean – and
misleading - credit profile,” Freddie Mac writes.
Freddie Mac writes that it’s important to keep in mind that using a CPN in that way is illegal.
“CPNs were not created for this purpose, and mortgage loans originated using a CPN are ineligible for
sale to Freddie Mac,” Freddie Mac writes. “Borrowers who use a CPN with the hope of leaving their bad
credit histories in the rear view mirror are in for a rude awakening. As the Federal Trade Commission
bluntly points out, ‘By using a stolen number as your own, the con artists will have involved you in
identity theft,’ for which you may face legal trouble.”
Freddie Mac writes that by raising awareness of these types of scams, lenders can help borrowers avoid
falling prey to scammers.
Freddie Mac said that lenders should remind borrowers that:
• Credit scores aren't used unfairly to block them from accessing credit; their purpose is ensuring
successful repayment of borrowed money. Ploys to circumvent official credit controls will likely set up
consumers to fail.
• The best way of raising and maintaining a healthy credit score is by consistently paying bills on time. A
quick jump in credit score is never worth the stain on their
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New Housing Data
Thursday, November 5, 2015
For those who see the proverbial glass as being half-full, today’s new housing data offered a reason for
cheers And for those that see the glass as being half-empty, there are new reasons to drink away one’s
sorrow.
On the good news front: RealtyTrac found that homeowners who sold during the third quarter realized
an average price gain of $40,658 (17 percent) from the purchase price of their property–the highest
average price gain for home sellers since the third quarter of 2007.
According to RealtyTrac, the average sale price of single family homes and condos nationwide during
the third quarter was $263,976, a slight 0.2 percent rise from the previous quarter and a 2.4 percent
jump from the third quarter of 2014. This marked the slowest year-over-year price appreciation in any
quarter since the first quarter of 2012.
RealtyTrac also found 2,487,664 existing single family and condo sales went through during the first
three quarters of this year, which the highest level for the first nine months of a year since 2006.
“An increasing number of homeowners in 2015 have been cashing out the home equity they’ve gained
during the housing recovery of the past three years,” said Daren Blomquist, vice president at RealtyTrac.
“That may be a good decision because the data points to a plateauing market going forward. Home price
appreciation is slowing, a trend that will continue if interest rates rise in the coming months as
expected. Meanwhile the threat of rising interest rates combined with lowered premiums for buyers
using FHA loans is spurring more demand.”
During the third quarter, 27.8 percent of single family homes and condos were all-cash sales, which is
down from 28.7 percent in the previous quarter and down from 29 percent a year ago. And 1.9 percent
of all sales involved institutional investors, which is up from 1.6 percent in the previous quarter but
down from five percent a year ago.
On the distressed housing side, 8.1 percent of all third quarter sales involved residential property that
was actively in the foreclosure process–the lowest level since RealtyTrac began following this figure in
January 2000.
There was also encouraging news in the Mortgage Credit Availability Index (MCAI) report issued by the
Mortgage Bankers Association (MBA). October’s MCAI rose 1.5 percent to 128.4, while increases were
recorded in all four component indices: the Conforming MCAI was up 2.7 percent over the month,
followed by the Government MCAI (up 1.9 percent), the Conventional MCAI (up 0.8 percent), and Jumbo
MCAI (up 0.5 percent).
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“Credit availability increased in October mainly as a result of new conforming loan programs, many of
which were affordable housing programs which have lower down payment requirements,” said Mike
Fratantoni, MBA’s chief economist.
Also on the rise were average fixed mortgage rates, according to Freddie Mac’s latest Primary Mortgage
Market Survey. Freddie Mac found the 30-year fixed-rate mortgage (FRM) averaged 3.87 percent with
an average 0.6 point for the week ending Nov. 5, up from last week’s 3.76 percent but still below last
year’s 4.02 percent. The 15-year FRM this week averaged 3.09 percent with an average 0.6 point, up
from last week when it averaged 2.98 percent but below last year’s 3.21 percent.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.96 percent this week
with an average 0.4 point, up from last week when it averaged 2.89 percent. A year ago, the five-year
ARM averaged 2.97 percent. And the one-year Treasury-indexed ARM averaged 2.62 percent this week
with an average 0.2 point, up from 2.54 percent last week. At this time last year, the one-year ARM
averaged 2.45 percent.
“Recent commentary suggests interest rates may rise in the near future,” said Sean Becketti, chief
economist at Freddie Mac. “Janet Yellen referred to a December rate hike as a 'live possibility' if
incoming information supports it. The October jobs report to be released this Friday will be one crucial
factor influencing the FOMC's decision."
But not all of the news is pleasant. On the home purchasing front, first-time homebuyers continue to be
an elusive commodity. New data from the National Association of Realtors (NAR) has determined that
the share of first-time buyers declined to 32 percent this year, down one percentage point from a year
ago. This marks the third consecutive year of that the number of first-time buyers is shrinking, and it
also marks the second-lowest share NAR began tracking these numbers in 1981 and the lowest since
1987’s 30 percent reading.
NAR also reported that the median age of first-time buyers was 31, unchanged for the last three years,
and the median income was $69,400, up from last year’s $68,300.
“Increasing rents and home prices are impeding their ability to save for a down payment, there’s scarce
inventory for new and existing-homes in their price range, and it’s still too difficult for some to get a
mortgage,” said NAR Chief Economist Lawrence Yun. “First-time buyers reported that debt (all forms)
delayed saving for a down payment for a median of three years, and among the 25 percent who said
saving was the most difficult task, a majority (58 percent) said student loans delayed saving. With a
median amount of student loan debt for all buyers at $25,000, it’s likely some younger households with
even higher levels of debt can’t save for an adequate down payment or have decided to delay buying
until their debt is at more comfortable levels.”
The typical first-time buyer purchased a 1,620-square-foot home (up from 1,570 in 2014) costing
$170,000; in comparison, the typical repeat buyer was 53 years old and earned $98,700 ($95,000 in
2014). On the selling side, NAR found that the typical seller over the past year was married, 54-years-
old, had a household income of $104,100 and owned the home for nine years prior to selling.
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Home purchasing was also the focus of a new Zillow analysis, which found an increase in the number of
applicants getting approved, especially among middle-income black and Hispanic loan applicants. But
disparities still exist between White and non-White homebuyers.
Zillow found that 11.2 percent of all home loan applicants were denied in 2014, but 23.5 percent of all
African-American applicants were rejected. Last year, African-American made up 12 percent of the U.S.
population and Hispanics made up 17.3 percent, but were only three percent and 6.1 percent of
conventional loan applicants, respectively. African-American made up only 2.5 percent of those
approved for a conventional loan in 2014 and Hispanics were 5.5 percent.
But Whites, who were 62 percent of the population, made up 69.5 percent of conventional loan
applicants and 71.9 percent of those approved for conventional loans.
Number of First-Time Home Buyers Falls to Lowest Levels in Three Decades
Nov. 5, 2015 11:18 a.m. ET
Figure represents third straight annual decline and lowest percentage since 1987
First-time home buyers fell to 32% of all purchasers in 2015 from 33% last year, the third straight annual
decline and the lowest percentage since 1987, according to the National Association of Realtors. Photo:
Bloomberg
Housing Market Tracker
http://graphics.wsj.com/us-housing-market/
The share of U.S. homes sold to first-time buyers this year declined to its lowest level in almost three
decades, raising concerns that young people are being left out of an otherwise strong housing-market
recovery.
First-time buyers fell to 32% of all purchasers in 2015 from 33% last year, the third straight annual
decline and the lowest percentage since 1987, according to a report released Thursday by the National
Association of Realtors, a trade group.
The historical average is 40%, according to the group, which has been recording such data since 1981.
The housing market is on track for its strongest year for sales since 2007, but the dearth of younger
buyers could pose long-term challenges, economists said. Without them, current owners have difficulty
trading up or selling their homes when they retire.
If home prices continue to rise sharply it will become even more difficult for new buyers to enter the
market. The median price of previously built homes sold in September was $221,900, up 6.1% from a
year earlier, according to the NAR. The median price for a newly built home rose to $296,900 in
September from $261,500 a year ago, according to the Commerce Department.
“The short answer is they can’t afford it,” said Nela Richardson, chief economist at Redfin, a real-estate
brokerage.
By delaying homeownership, younger households are forgoing the opportunity to accumulate wealth,
said Ms. Richardson.
“When you wait 10 years to buy a house, you’re missing out on a pretty steady source of equity,” she
said. “That equity has helped previous generations do all kinds of things, like retire.”
A quarter of first-time buyers said their biggest challenge was saving for a down payment. Of those, a
majority said student loans were the main obstacle.
Fannie Mae CEO Timothy J. Mayopoulos said on Thursday that although lenders are loosening home-
loan requirements, some are still eschewing borrowers who would qualify under the mortgage-finance
company’s guidelines but are on the riskier end of the credit spectrum.
Mr. Mayopoulos also said a large number of first-time buyers and other borrowers aren’t applying for
loans because they don’t think they would qualify, even if they are likely to get approved.
“Among millennials and people generally, folks are living more conservatively than they did in the past.
They are managing their affairs in a very cautious way,” Mr. Mayopoulos said. “What we’re experiencing
is a little bit of a natural reaction to this very difficult economic period that we went through.”
Economists also said rents, which have jumped 20% over the last five years, have made it difficult for
younger households to put money aside.
Toby Bozzuto, president and chief executive of the Bozzuto Group, a Washington-area builder, said
tenants in his buildings are paying rents “considered commensurate with a mortgage payment” to live
near good restaurants, shorten their commutes and enjoy amenities such as having their trash picked up
right outside their doors.
Many economists predicted 2015 would be the year when first-time buyers would finally make a
comeback, as job and income growth accelerated, mortgage rates remained low and the memory of
seeing relatives battered by the housing bust started to fade.
“I thought we would see some pick up in the first-time buyers given that the economy has been
expanding for years,” said Lawrence Yun, NAR’s chief economist. But “there are some hurdles to
overcome.”
A quarter of first-time buyers used a gift from a friend or a relative for their down payment. Those
buyers tended to be slightly more affluent and to buy bigger homes than similar buyers in 2014.
The typical first-time-buyer household earned $69,400, up from $68,300 in last year’s survey. They
purchased a 1,620-square-foot home costing $170,000. The median repeat buyer purchased a 2,020-
square-foot home costing $246,000.
The NAR report is based on a survey of more than 6,400 households that purchased a home between
July 2014 and June 2015.
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House Financial Services Committee Examines HUD Outcomes Over the Department's 50 Year History
OCTOBER 29, 2015
On October 22, the House Financial Services Committee held a hearing entitled, "The Future of Housing
in America: 50 Years of HUD and its Impact on Federal Housing Policy" to review the effectiveness of
HUD programs since the Department was established half a century ago.
Chairman Jeb Hensarling (R-TX) said in his opening statement that though HUD has had notable
achievements in the past 50 years, poverty is still endemic in America. He contended that HUD needs
not only to provide housing, but to empower recipients to pursue happiness and proposed that new
metrics must be established to determine progress, the regulatory burden accompanying HUD programs
must be eased, and educational opportunity must be provided to program recipients to empower them
to escape intergenerational poverty.
In her opening statement, Ranking Member Maxine Waters (D-CA) spoke to the effectiveness of the
HOME program, saying that it contributes 1.2 million affordable housing units, including almost 500,000
units for first-time homebuyers. She also stated that HUD played a key role in reducing the number of
homeless veterans across America by 33 percent and has provided housing assistance to 35 million
families in the last 20 years alone. She praised the Neighborhood Stabilization Program in particular,
which has infused $7 billion into local communities over the life of the program. Waters spoke to the
need for a fully funded HUD, which could more effectively utilize the programs it has in place to address
the continued need for affordable housing.
Housing and Insurance Subcommittee Chairman Blaine Luetkemeyer (R-MO) expressed frustration with
the continued demand for housing assistance despite the large amount of funding Congress has
appropriated to HUD programs since the department's establishment. He argued that excessive
regulation in HUD programs is a disincentive for private sector involvement and said his bill, H.R. 3700,
seeks to ease the regulatory burden and increase private sector participation.
Testifying before the Committee, Renee Glover, Founder and Managing Member for The Catalyst Group,
LLC, stated that over the past 50 years, HUD has learned through experience that decentralizing poverty
should be a policy goal and has developed programs such as Hope VI and Promise Zones to achieve this
objective. She maintained that Section 8, when used appropriately, can provide access to high-
opportunity neighborhoods, improving outcomes for program recipients, and contended that it is
important to build on this experience to design programs that adhere to the objective of decentralizing
poverty.
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Howard Husock, Vice President of Research and Publications at the Manhattan Institute, argued that
many HUD programs result in long term dependence on government assistance by low-income
households. Husock stated that percentage-of-income-based rent-setting effectively de-incentivizes
earning additional income. He told the Committee that the Moving to Work program provides flexibility
to encourage upward mobility and creates tangible results in work participation and wage growth for
program recipients.
Xavier Briggs, Vice President of Economic Opportunity and Assets at The Ford Foundation, said that
many of the variables that affect affordable housing supply are outside the purview of HUD. He testified
to the efficacy of the tax code to encourage affordable housing production through the Low Income
Housing Tax Credit while simultaneously encouraging wage-seeking through the Earned Income Tax
Credit, but he also noted the tax code disproportionately benefits middle-income and affluent
homeowners through the mortgage interest deduction. He stated that additional funding for HUD
programs is required to maintain the same level of service due to increasing rents and development
costs, which are due to market forces beyond the control of HUD.
Orlando Cabrera, Counsel at Squire Patton Boggs and former executive director of the Florida Housing
Finance Corporation, testified that there is a need to develop new metrics to better measure the success
of HUD programs. These new metrics will require improved data systems at HUD to replace aging
technology.
The entire panel supported Hensarling's proposal that HUD expand the Moving to Work program and
similar efforts to encourage program recipients to achieve independence from HUD programs. Husock
reiterated the importance of a fixed rent, or a rent that increases with income bands to encourage wage
growth in affordable housing tenants.
Waters received affirmative responses from the panelists when she asked them if HUD was important in
creating credible improvement to housing opportunities through the past 50 years. Waters also asked
the panel what percentage of public housing tenants are capable of working. Briggs stated that the
majority of public housing tenants are seniors or persons with disabilities. Cabrera emphasized that
employment should not be a precondition for receiving housing assistance. He said Congress should
establish as a new HUD objective the goal of empowering tenants to seek greater educational
attainment and job opportunity.
At the end of the hearing, Representative Bruce Poliquin (R-ME) told the panelists that he had previously
served on the board of a public housing agency in Maine and noted his concern about the high cost of
building new affordable housing, which he claimed could be as much as $300,000 per one-bedroom unit
in Maine, while single-family homes sell for far less. Poliquin said Maine then instituted practices to
encourage developers to reduce costs. Cabrera responded that asset management techniques are
helping to keep costs down and noted that while the cost of building a unit might be $300,000 or more
in some places, it is often considerably less and projects are held to lengthy affordability periods.
Hensarling concluded the hearing without a timeline for additional hearings or markups.
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HOME Coalition Report and Briefing Raises HOME's Profile in Congress
October 28, 2015
Earlier today, the HOME Coalition, which NCSHA chairs, unveiled its just-released report, Building
HOME: The HOME Investment Partnerships Program’s Impact on America’s Families and Communities,
at a briefing on the Hill for members of Congress and their staff. The first-of-its kind report analyzes
HOME’s housing and economic impact at the national and state levels.
The briefing was standing room only, with more than 65 congressional staff members from both sides of
the aisle and both chambers attending. Many of the congressional staff in the room work for the
Appropriations Committees or in the personal offices of Appropriations Committee members. The
strong showing indicates that, thanks to NCSHA’s and our HOME Coalition allies’ advocacy efforts,
members of Congress and their staff are paying attention to what happens to HOME.
Long-time HOME supporters, Senators Patrick Leahy (D-VT) and Chris Coons (D-DE), sponsored the
briefing. In his introductory remarks, Senator Coons noted that he was hopeful about the budget deal
congressional leaders and the White House announced earlier this week that would raise the caps on
both domestic discretionary and defense funding, but explained that this only provides new top-line
numbers, and does not indicate increases for specific programs. He charged those in the room with
making sure HOME funding is restored as appropriators write new spending bills under the increased
budget numbers.
Pennsylvania Housing Finance Agency’s (PHFA) Bill Fogerty presented at the briefing, explaining how
PHFA uses HOME funds to provide affordable rental and homeownership options to low-income
households in Pennsylvania. Also speaking at the briefing were Sarah Mickelson from Enterprise
Community Partners, Tony Gibbons from Blount County Habitat for Humanity, Jaqueline Alexander from
The Community Builders, and Kathy Koch from Arundel Community Development Services.
According to Building HOME, states and communities have invested $26 billion in HOME funds and
leveraged an additional $117 billion to build and preserve 1.2 million affordable homes and provide
rental assistance to 270,000 families since 1992. The report also estimates that this investment has
supported more than 1.5 million jobs nationwide and generate $94 billion in local income. In addition to
Building HOME, the HOME Coalition also released state-by-state HOME fact sheets and success stories.
Through hard data and compelling case stories from across the country, Building HOME makes the case
that Congress should be investing in HOME instead of continuing to cut this critical program. Congress
has already cut HOME funding in half in recent years, from $1.8 billion in Fiscal Year (FY) 2010 to a
record low of $900 million in FY 2015.
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While the Administration’s FY 2016 budget proposed to increase funding to $1.06 billion in 2016, the
House and Senate Appropriations Committees-- constrained by spending caps imposed by the Budget
Control Act of 2011 --sought to cut HOME direct appropriations to $767 million and $66 million,
respectively. They will have the chance to revisit those cuts assuming Congress passes the newly
announced budget deal and once appropriations subcommittees have new spending levels set for their
individual bills.
For more information on the report and other actions the HOME Coalition has taken to protect and
restore HOME funding, please visit the HOME Coalition webpage.
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House Housing Subcommittee Considers Chairman's Housing Reform Bill
OCTOBER 28, 2015
The House Financial Services Subcommittee on Housing and Insurance on October 21 held a hearing
entitled “The Future of Housing in America: Federal Reforms that Create Housing Opportunity,” focused
on the Housing Opportunity Through Modernization Act, H.R. 3700, which Subcommittee Chairman
Blaine Luetkemeyer (R-MO) introduced earlier in October. As NCSHA reported at that time, H.R. 3700
combines relatively noncontroversial policy changes from several individual housing bills that enjoy
bipartisan support, including simplifying the project-based voucher program, permanently authorizing
the USDA Multifamily Housing Revitalization Program, streamlining preservation under the Low-Income
Housing Preservation and Resident Homeownership Act, making improvements to HUD’s Family
Unification Program to help youth aging out of foster care, and authorizing a pay-for-success
demonstration program to improve water and energy efficiency in HUD-assisted multifamily
developments.
Testifying before the Committee, Hilary Swab Gawrilow, Director of Federal Policy for the Corporation
for Supportive Housing, and Evelyn Craig, Chief Executive Officer for Restart, Inc., focused on the need
for continued support for foster youth once they age out of care. They encouraged the Chairman to
further modify the Family Unification Program (FUP) by providing youth access to FUP housing vouchers
up to three months before they age out of foster care to allow them time to adapt to a new home while
they retained the support network foster care provides to them. National Leased Housing Association
Board Member Laura Burns applauded the chairman for including modifications to FUP that would
extend the limit on FUP vouchers from 18 months to 36 months and allow children aging out of foster
care to be eligible for the vouchers until they are 24.
Several Subcommittee members asked witnesses how HUD programs encourage participants to live
more independently. Representatives Steve Pearce (R-NM), John Carney (D-DE), and Andy Barr (R-KY)
argued that the long waitlists that confront potential program participants are due in part to low
turnover and insufficient incentives to seek financial independence.
Gawrillow pointed to HUD’s Family Self-Sufficiency (FSS) Program as an example of a program designed
to help program recipients achieve independence. She said encouraging local PHAs to refer more
Section 8 tenants to this program may help families receiving housing benefits to eventually achieve
independence. Also testifying, Will Fisher, Senior Policy Analyst, Center on Budget and Policy Priorities,
agreed that improvements to FSS would contribute to a higher exit rate for the program. He also stated
that investing in skills training and furthering the educational achievement for individuals receiving HUD
assistance is important for reducing reliance on HUD programs. Another witness, Stephen Merritt,
Executive Director, Norwood Housing Authority, cautioned against applying time limits to eligibility for
Section 8 and encouraged Congress to provide flexibility to PHAs instead.
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Representative Keith Rothfus (R-PA) asked Merritt if an extended review cycle for tenants on fixed
incomes would ease the administrative burden on project managers. Merritt responded affirmatively
and added that he would stagger the reviews in three equal parts to allow his staff time to have more
time for other efforts.
Burns and another witness, Kevin Kelly, 2014 Chairman of the Board, National Association of Home
Builders, spoke to the need for lower initial reserve requirements under FHA multifamily mortgage
insurance programs, explaining that reserves could grow over the life of the project. They said this
approach would make projects easier to finance and more attractive to private investors.
Leutkemeyer did not indicate when the Subcommittee would mark up the legislation.
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Rural Development Hearing Highlights Rental Assistance Contract Challenges
OCTOBER 26, 2015
The Senate Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug
Administration and Related Agencies held a hearing titled “Review of Rural Development in 21st Century
America” on October 21. Witnesses in the two-panel hearing included US Department of Agriculture
(USDA) Rural Development (RD) officials and industry stakeholders. The hearing focused on RD
programs including Rural Utilities Service and Rural Housing Services (RHS).
During the first panel, Subcommittee Chairman Jerry Moran (R-KS) asked RD Undersecretary Lisa
Mensah if USDA had underestimated its rental assistance renewal needs for Section 515 rural rental
housing and Sections 514 and 516 farm labor housing, as laid out in its Fiscal Year (FY) 2016 budget
request. Mensah acknowledged that funding rental assistance was an ongoing challenge and testified
that requirements forcing USDA to submit budget requests two years in advance are partly to blame for
the discrepancy. Chairman Moran urged Mensah to work with the Subcommittee to provide more
accurate forecasts, explaining that appropriations bills have a fixed amount of funding to work from and
this would affect other USDA programs.
Ranking Member Jeff Merkley (D-OR) used his time to delve further into the issue of rental assistance
renewal funding. According to his estimates, Merkley said that USDA had already short-funded rental
assistance contracts by $101.5 million in FY 2015, and due to its latest underestimation, was poised to
short-fund rental assistance contracts by $120 million in FY 2016. Ranking Member Merkley stressed
how devastating this is to affordable housing owners and operators, tenants, and future participation in
the USDA rental assistance programs. During the second panel, Tony Chrisman, Vice President and
Owner of Chrisman Development Inc., testified that his portfolio of affordable housing properties in
Oregon already has been negatively impacted by the FY 2015 shortfalls. Chrisman said that FY 2015
rental assistance ran out in August and he has stopped receiving payments, leading to a $365,000
shortfall in his portfolio alone. Chrisman added that USDA-approved rental agreements allow owners to
raise rents on tenants in the absence of RHS funding, although many tenants would not be able to afford
such increases. Chrisman has not acted on this authority, since he hoped the problem would be resolved
quickly.
RHS Administrator Tony Hernandez testified that RHS was working to address this funding issue but did
not yet have the authority to backfill these contracts. Chairman Moran and Ranking Member Merkley
both argued that the Continuing Resolution passed on September 30 included language to do just that--
allowing RHS to backfill rental assistance contracts for properties that had previously exhausted their
funding under contracts entered into or renewed in FY 2015. Chairman Moran added that it was his
understanding that USDA General Counsel was currently examining this issue but that it was the full
intention of the Committee to provide this authority. Both Moran and Merkley urged ongoing dialogue
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with USDA on this and suggested that they would be willing to work on further legislation if necessary to
correct this matter.
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No Longer a Niche, Consumer-Direct Lenders Lead Mortgage Innovation
October 26, 2015
"You have an opportunity to gain market share if you interact with people the way they are comfortable
interacting," said Bill Emerson, CEO of Quicken Loans and the new chairman of the Mortgage Bankers
Association.
It wasn't long ago that the consumer-direct mortgage channel was a novelty catering to a niche segment
of technology aficionados and refinance borrowers. But as consumers have increasingly embraced all
manners of electronic commerce, these online lenders have seized on growing expectations for a
digitally-focused and interactive experience to firmly establish their place in the industry.
In that context, the naming of Quicken Loans CEO Bill Emerson as chairman of the Mortgage Bankers
Association, serves as a (possibly overdue) acknowledgment that the digital channel is transforming the
mortgage business, albeit not as rapidly as it has some other retail financial services.
Quicken's tech-savvy approach to mortgage lending will no doubt influence Emerson's work as a
spokesman and advocate for the entire industry.
In an interview with National Mortgage News, Emerson, who was sworn in at the trade group's annual
convention in San Diego, discussed the ways that digital tools are reshaping the business — and the
balancing act associated with migrating a very complex transaction into an online environment.
Make no mistake; online lenders are a major force in the mortgage industry. And with some estimates
indicating that more than half of homebuyers complete their mortgage applications online, a growing
number of established traditional lenders are looking to reshape their businesses by replicating the most
popular features of the consumer-direct channel.
Now, experts say several market factors — including the shift to purchase-driven originations, the
growing number of millennial buyers, and new, complex regulations that demand increased technology
adoption to maintain compliance — may create a perfect storm for digitally-focused lenders.
The biggest driver of these changes, Emerson said, is consumers' growing desire for online engagement
during the origination process.
"A lot of people now exist with what I call their 3-by-5 business card — their phone," he said. "You have
an opportunity to gain market share if you interact with people the way they are comfortable
interacting."
While Emerson said there will always be a place for face-to-face lending, even those models can benefit
from technology improvements, "because all of the back-office work that's done could be more efficient
with better technology."
"The more efficient and effective you can be there, the better you will do in the marketplace," he said.
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The borrowers who initially gravitated toward the consumer-direct channel were predominately
technology early adopters and refinance customers already comfortable with the mortgage process.
That helped online lenders capitalize on the tremendous refinance activity seen during the post-crisis
housing recovery.
But after years of low interest rates and high refinancing volume, the origination mix across the industry
is expected to shift predominately toward purchase lending. The challenge for online lenders will be to
demonstrate to borrowers — as well as their real estate agents — that they offer the same, or better,
level of customer service that a retail loan officer can provide face-to-face.
Emerson said technology can help bridge the gaps. He said Quicken Loans' origination mix has changed
along with the market (though they do not release origination numbers), and to accommodate this
change they developed a system that allows real estate agents "unprecedented access to their clients'
loan information so they can simply log in to a portal and know exactly where the loan is in the
origination process."
This type of transparency is what Keith Luedeman was aiming for when he founded goodmortgage.com
in 1999. He said purchases have been increasing "steadily over the past year," and now make up 50% of
his business.
"For purchase customers, the key is staying in touch over time and being ready to move quickly to
approve when they find a home," he said. "Our technology allows us to do so in a seamless and
coordinated way that customers seem to appreciate.
Luedeman worked for IBM before founding his Charlotte, N.C., consumer-direct mortgage company,
where he gained a solid understanding of technology's ability to make complicated processes easier.
He's translated that to the mortgage sector, resulting in rapid growth. He's watched his company
expand from just three employees to well over 100, and said the top technology powering his site is
responsible for the rapid growth. He expects that further technological advances will continue to push
the industry forward.
"The evolution — or maybe the revolution — is not over yet," he said, adding that he thinks that the
rise of smartphones and tablets will mean even more changes in the near future. "I could even see how
the Apple Watch could send alerts out during the process."
Luedeman's goal when starting goodmortgage.com was to take the "mystery" out of mortgage lending
from a customer perspective, and make the process more efficient. Now, he said, goodmortgage.com is
paperless and allows customers to e-sign documents.
"If you think through those old days, you look through the phonebooks, you call a couple of lenders,
you make an appointment with your spouse and you take time off work," he said, adding that his
company offers customers a less stressful and time-consuming experience than traditional mortgages.
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This ease of lending is exactly what customers are looking for when they turn to online lending, said
Emerson. In the fast-moving market, how quickly a lender can move the borrower through an
application may be the difference between getting a return customer and losing a sale.
Quicken Loans closes the majority of its loans in 30 days, quicker than traditional retail lenders,
particularly given the heightened regulatory environment for mortgage lenders. Quicken is now the
second-largest mortgage lender in the United States, closing $140 billion in mortgage volume in 2013-
2014 — more than four times its volume from 2011.
David Spector, president and COO of PennyMac Loan Services, said the ability of digitally-savvy
companies to move faster is also due to how they are structured. His company, which was founded in
2008, was initially created to do workouts on distressed loans.
Their digital platform supported by call centers was originally set up as a direct-to-consumer platform
for these customers, as there was no need for branches or account executives.
Now, he said, PennyMac is trying to grow their online lending platform "akin to other direct-to-
consumer lenders like Quicken or Loan Depot."
"In the brick-and-mortar model, consumers need to call the loan officers to get updates, while the
officer will call several times for additional documentation," Spector said. "But if you have the
technology where you can just send questions out and the customer can send answers and
documentation back, it's going to be a much faster, much more nimble process."
Guaranteed Rate, founded in 2000 by Victor Ciardelli, operates a more developed version of this
structure. In just 15 years, the company has become one of the top 10 lenders in the country. Ciardelli
credits the company's meteoric rise to their innovative online platform.
This year, the company introduced an all-digital mortgage process, which it boasts lets consumers
complete the application and initial approval process in less than 30 minutes.
The self-service process guides borrowers as they complete and e-sign their application, review their
credit score and evaluate loan rates and products customized to their needs. Rather than have
borrowers email or fax verification documents, applicants submit data to a secure cloud storage service
via file upload, scanning or taking a picture.
Spector hopes PennyMac's origination process will soon be completely paperless, which will "enhance
the customer experience and also help reduce the defects and errors you often see in the loan
origination process."
"You dramatically reduce human error in this process," he said, offering the digital scanning of account
numbers as an example. "If we can avoid borrowers putting in information or processors typing the
information in, you just end up with fewer errors in the process, which brings more efficiency."
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Ciardelli said the streamlined nature of online applications has made his loan officers "insanely more
efficient."
"We've got 17 loan officers that have already closed over $100 million this year, with almost 100% of
that going through online," he said. This wouldn't be possible in a traditional setting, typified by stacks
of paperwork and countless phone calls.
Along with the increased productivity on the part of the company, he said customers prefer the
efficiency, and say they are more supported and feel "they have more control over the process."
"Customers love it," he said, adding that because customers input all of their own information, "there is
more time for the loan officers and the people who are handling the transaction to work on the
customer service side."
For Emerson, the ability to provide good customer service is one of the most attractive parts of being a
digital mortgage company.
"I think that people think if you are high-tech, you can't be high-touch," he said, adding that his
company has won five consecutive J.D. Power awards for customer satisfaction in mortgage origination,
as well as two consecutive J.D. Power awards for client satisfaction in mortgage servicing — going back
to when Quicken started servicing loans two years ago.
First Internet Bank was opened to the public in 1999 with a similar goal of providing consumers with a
solid digital-only banking experience that's backed by quality customer service.
Kevin Quinn, the company's senior vice president of retail lending, said that when the bank first began
offering mortgages online, "it was kind of like "Field of Dreams" — build it and they will come." While he
anticipated the practice would grow quickly in popularity, it was difficult to plan for the needs and wants
of customers in such a new space.
"We built the site so customers could complete a mortgage application without placing a single phone
call to our office, but even now, five years later, most don't," he said. "The human element is still a
critical component on our end. [Customers] need people to be available. They want the loan officer on
the phone with them walking them through the process."
He said such personalized service is necessary, because customers either have never gotten a mortgage
before or they've never done a mortgage online, and both parties have a lot of questions. "I personally
don't buy cars every other year. I buy them every 10 years, and that experience is different for me each
time."
Because home buying isn't a frequent event for most customers, it can be difficult to keep customers
coming back. Calling it the "nature of the business," Emerson said that lenders have to be prepared for
the fact that good customer service doesn't always translate into repeat business.
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"Even if you wanted to have a high-touch, high-loyalty situation, it's easy for them to move on next
time," he said.
The habits of millennials seem to have been heavily debated in regard to this type of brand loyalty. It
seems like contradictory studies on their buying practices come out almost daily, with some asserting
that lending companies should have "stories" behind their brand to attract the mustachioed, ethically-
minded 20-something, while others say the brand doesn't matter at all — young folks are just looking
for the best deal.
"The boxing in of millennials into a stigma is a bad thing. It comes down to an ability to transact the way
they want to transact," Emerson said, adding that they aren't the only ones who prefer the convenience
of all-digital services. "People enjoy interacting with us in the company of their own home at their own
time — 24/7."
Ciardelli said he was originally "shocked" to find how popular digital lending was among all age groups.
"When we were spending the money and building the technology, we anticipated that it would be the
younger generation that would use it, but our demographics are not showing that," he said, adding that
the average age of an online user is 47. "We're having grandmothers go on and upload their
documents."
While digital lending is convenient for everyone, it's difficult to ignore how much more popular such a
model will become as more tech-savvy millennials begin to enter the market. Luedeman of
goodmortgage.com said that while there may always be some section of society that wants to sit down
with a lender face to face, "that segment is decreasing at a very fast clip."
"I think millennials deserve a lot more credit than people give them. They want to do research, they
want to analyze," he said, and they will almost always go online to do it.
The ability to research and compare mortgages side by side has been a large part of the draw behind
the new TILSA-RESPA Integrated Disclosures rules enacted by the Consumer Financial Protection Bureau.
The rules aim to increase transparency and eliminate confusion for borrowers — something Luedeman
said will be easier for digital lenders to adjust to than traditional lenders.
"It's locking in fees from the beginning for the consumer, and we always had that advantage. Our
customers were very rarely surprised," he said, adding that his company was able to adjust to the
regulations a couple of months before they were required to.
"In terms of safety and security, we always encouraged customers to compare things from the very
beginning," he said. "We knew that with our technology platform, we already had great rates and fees,
so we were going to win in an honest comparison."
Though quite a bit larger than goodmortgage.com, Emerson said Quicken Loans was also able to
accommodate the new regulations quickly because of how nimble an all-digital platform allows
companies to be.
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"The rules are very complicated because of the web of regulation and how much overlaps between the
state governments and the federal government," he said. "There is a myriad of things a lender has to
know and understand, and the more capacity you have to build those rules into your technology
platform, the more compliant you will be."
Quicken Loans had 350 employees working on the new TRID rules for 18 months, and because of that
focus, the company was ready for TRID's original August deadline, which was later pushed back to Oct.
3.
"It wasn't easy," he said. "But I do believe our technology gave us an advantage."
This advantage is something Emerson said he'd like to become more widespread in the industry. As the
new chairman of the Mortgage Bankers Association, the digitally-minded approach that Quicken Loans
embraces will no doubt influence his broader views on the mortgage industry. Technology, he said, will
certainly be among them. "It's something we'll talk about, and it's something we'll advocate for," he
said.
But, he said, "At the end of the day, when it comes to the investment in technology, it will be a member
decision." The MBA's role will be to increase awareness about the direction of the marketplace so
companies can make better decisions by themselves.