Where is mortgage money going to come from?

David Goldsmith

All Powerful Moderator
Staff member
New York home loan delinquencies double.
Home loan delinquencies soar in cities
Risen driven by loans 30 to 59 days past due

The U.S. home loan delinquency rate in April 2020 spiked 70 percent above its level a year ago, according to a recent report from real estate data company CoreLogic. (iStock)
The U.S. home loan delinquency rate in April was 70 percent higher than a year ago, according to a recent report from real estate data company CoreLogic.
This growth was driven by early-stage delinquencies — loans with payments 30 to 59 days overdue. April’s early-stage delinquency rate of 4.2 percent was more than double the rate in April 2019. However, serious delinquencies, with payments at least 90 days past due, fell to 1.2 percent of loans, their lowest level since June 2000.

Although delinquencies have risen in each of the 10 largest metro areas, home loans in some places have performed better than in others. As a general rule, metros where governments enacted work and travel restrictions in March to curb the coronavirus outbreak clocked higher April delinquency rates than places that enacted restrictions later.
Miami
The major metro area with the highest delinquency rate was Miami, where the county’s mayor ordered all nonessential businesses to close in March but where coronavirus cases have recently skyrocketed. Miami’s home loan delinquency rate was the highest among the top 10 metro areas by population in April 2020, reaching 11.5 percent. That was a 6.7 percentage-point increase and a 140 percent increase from a year ago.

New York City
Next on the list is New York City, where the April delinquency rate climbed to 10.4 percent, more than double its level at the same time last year.
New York City was hit early and hard by the coronavirus outbreak and became its global epicenter in mid March, accounting for 5 percent of all cases globally. New York Gov. Andrew Cuomo and New York City Mayor Bill de Blasio at that point took aggressive steps to curb the virus’s spread by enacting restrictions on travel, dining, and all nonessential work.
Within weeks of the first confirmed coronavirus cases in the United States, thousands of New Yorkers lost their jobs as hotels, retailers and construction firms laid off or furloughed staff. Strapped for cash, New York borrowers were three times more likely to request forbearance on their home loans than the typical borrower, according to one analysis of 22,000 mortgages across the United States.

Las Vegas
The lion’s share of the Vegas workforce is in the leisure and hospitality industry, so hotel closures have sent unemployment claims skyward and decimated many residents’ budgets. The outlook in the coming months doesn’t look much better, with job losses related to coronavirus estimated to double those of the 2007-2009 recession. This has translated into poorer loan performance: In April 2020, the Las Vegas home loan delinquency rate increased to 8.5 percent, up from 3.2 percent a year earlier.

Houston
The delinquency rate in the self-proclaimed “energy capital” of the United States jumped to 8.2 percent in April 2020 from 4.5 percent a year before. Houston is suffering two overlapping global crises: the pandemic and cratering oil prices caused by a price war between Saudi Arabia and the Russian Federation. Major petroleum companies headquartered in Houston have laid off thousands of employees, and some 200,000 to 300,000 workers may lose their jobs, according to some estimates.

Chicago
The Chicago metro area’s delinquency rate in April 2020 was 6.6 percent, up from 4 percent a year ago. Compared to other cities, that might seem relatively modest, but clouds have been gathering over the Chicago residential market for some time: Cook County, which encloses Chicago, ranked among the 50 most vulnerable counties in the United States by foreclosure risk, according to a recent report from ATTOM Data Solutions.
 

David Goldsmith

All Powerful Moderator
Staff member
Nearly 1 in 6 FHA mortgages are delinquent
Far more FHA borrowers are behind on payments than conventional mortgage borrowers

As the coronavirus pandemic continues to devastate the economy around them, an alarming share of people holding America’s most accessible and affordable mortgages are behind on payments.
Around 16 percent of Federal Housing Administration mortgages were in delinquency in the second quarter, according to Bloomberg. That’s the highest percentage in delinquency going back at least four decades to records starting in 1979.

FHA mortgages are generally made to first-time homebuyers and low-income borrowers with credit scores too low to qualify for traditional mortgages. They also allow borrowers to buy with a smaller down payment.
Delinquency rose from 9.7 percent in the first quarter. In the second quarter, 6.7 percent of conventional mortgages are delinquent.

Some borrowers stopped paying their mortgages after losing their jobs during the pandemic. FHA mortgage holders are protected from foreclosure by a federal forbearance program, at least in the short term. The program allows borrowers to delay payments for up to a year without any penalties, according to Bloomberg.

The pandemic is impacting the housing market in other ways. Federal interest rates cuts have sent interest rates on the 30-year conventional loan below 3 percent, their lowest in 50 years.
But home prices are at record levels in some markets and economic volatility has prompted some lenders to tighten their standards to the point of refusing borrowers they would normally accept. The nature of the pandemic has hampered the ability to close deals.
 

Dean.Collins

New member
I keep hearing that we are at all time record low rates......but im still yet to find a cheaper mortgage than my existing 30 year fixed of 3.25% that we signed up with some 4 or 5 years ago.
(Jumbo $875k on 2.4m coop, 740+ credit).

Id willingly love to refinance to a lower rate......but when you inquire all these sub 3% mortgages turn out to actually be higher than what we are paying today.....
 

TMalloy

New member
There is much more variance in the Jumbo market since it's entirely private and not backed the feds. There was just an article in the WSJ today about it: https://www.wsj.com/articles/jumbo-mortgage-rates-11597945255

That being said it is certainly possible to originate a jumbo mortgage for under 3% today (although it will likely require closing points and/or relationship pricing). However refinance rates in the non-Jumbo market run 0.25-0.5% higher than rates for new purchases, so it's not surprising that you are having trouble beating the 3.25% you already got.
 

David Goldsmith

All Powerful Moderator
Staff member
On Wednesday night, mortgage purchasers Fannie Mae and Freddie Mac, informed lenders that, starting in about two weeks, they will be adding a 0.5% fee when buying refinance mortgages. Known as an Adverse Market Refinance Fee, the charge is meant to offset the risks and expenses the firms say they have taken on due to the coronavirus pandemic. The costs of the new will surely be passed onto consumers, either in the form of higher closing costs or higher mortgage rates, experts say.
 

David Goldsmith

All Powerful Moderator
Staff member

David Goldsmith

All Powerful Moderator
Staff member
PIMCO warns of danger in Fannie, Freddie privatization
Bond giant fears plan could lead to another bailout

Pacific Investment Management Company, one of the world’s largest bond investment firms, said the housing market could be in trouble if Fannie Mae and Freddie Mac’s privatization plan goes forward — and it could lead to another government bailout.
In a letter Monday, PIMCO warned that if the Federal Housing Finance Agency’s plan to end government conservatorship of Fannie and Freddie proceeds, “mortgage rates will increase, homeownership will likely suffer, and the national mortgage rate will no longer exist.”

Newport Beach, California-based PIMCO is concerned that if the FHFA bypasses Congress to privatize Fannie and Freddie, investors — including some of its clients — would stop buying Fannie and Freddie mortgage-backed securities. These investors would be under the impression that the government is no longer guaranteeing these securities, according to PIMCO.

Mark Calabria, who leads the Federal Housing Finance Agency, is attempting to put together $240 billion in capital that Fannie and Freddie would need to hold to go private. Calabria, a former director of the Cato Institute who worked with Vice President Mike Pence, is facing immense pushback for some of his initiatives from the housing and mortgage industries and, at times, even President Donald Trump.

But now PIMCO has entered the conversation. With close to $2 trillion in assets under management, PIMCO is perhaps the most powerful player in the fixed-income universe and is one of the largest buyers of Fannie and Freddie mortgage-backed securities.

Fannie and Freddie do not originate mortgages, but instead buy them from lenders, securitize them and sell them to investors. Fannie and Freddie also help control mortgage rates.
The government took over the entities after the 2008 financial crisis to stave off insolvency because of their exposure to subprime loans.
PIMCO presented a list of reasons why it was important for the government to retain control of the two federal housing agencies. At one point in its letter, PIMCO argued that government backing helps keep mortgage rates the same in housing markets across the country.

“The explicit government guarantee facilitates this ability for otherwise similar borrowers to have access to the same homogenous rate across very heterogeneous regional markets,” PIMCO wrote.
PIMCO concluded, “Releasing the GSEs as private companies will not only fail to produce these benefits, but if past is prologue, will likely end in another bailout by way of conservatorship.”

Calabria recently announced the FHFA would look to impose higher fees on lenders on the refinancing of Fannie and Freddie mortgages. Mortgage groups said that would add $1,400 on average to a borrower’s refinancing costs. After pushback, the agency delayed the new fee from September until December.

Mortgage rates are at historic lows, fueling the housing and mortgage markets during an otherwise lagging economy.
 

David Goldsmith

All Powerful Moderator
Staff member

Fannie Mae Updates on Single-Family Delinquency Rate


Fannie Mae Conventional Single-Family Serious Delinquency Rate increased 59 basis points to 3.24% in July. One year earlier, this serious delinquency rate was 0.67%.
In weighing serious delinquency rates based on vintage, the highest level of problematic loans was in the 2005 to 2008 origination period (9.36%), followed by loans originated in 2004 and earlier (5.57%) and loans originated from 2009 onward (2.79%).
As of July 31, 5.8% of Fannie Mae’s Single-Family Guaranty Book of Business was based on unpaid principal balance in active forbearance and 5% of its loan count was also in active forbearance; in comparison. The majority of loans were active forbearance were attributed to financial problems related to the COVID-19 pandemic.
Fannie Mae’s Multifamily Serious Delinquency Rate increased 25 basis points to 1.25%, while only 1.1% of its Multifamily Guaranty Book of Business based on unpaid principal balance was in an active forbearance. As with the single-family side of the business, Fannie Mae attributed the majority of active forbearance conditions to the pandemic’s economic tumult.
Fannie Mae's Guaranty Book of Business increased at a compound annualized rate of 8.7% in July, to $3.55 billion, with $3.43 billion in mortgage-backed securities and $115.4 million in mortgage loans. In comparison, the Guaranty Book of Business was at a compounded annualized rate of 6.8% for a total of $3.31 billion.
Fannie Mae issued resecuritizations in July that were backed by $8.4 billion in Freddie Mac securities. Fannie Mae's maximum exposure to Freddie Mac collateral for the month that was included in outstanding Fannie Mae resecuritizations was $105.7 billion.
 

David Goldsmith

All Powerful Moderator
Staff member
Delinquencies up and sales of MBS jumping because the Fed has unlimited appetite. Does that sound at all familiar?
Mortgage-backed securities boom breaks monthly record
New high in single-family home category

Thanks to low mortgage rates and a surge in home-loan refinancing, the number of mortgage-backed securities has skyrocketed.
The value of single-family mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac was almost $322 billion in August, a new monthly record, according to an analysis by industry-research firm Inside Mortgage Finance cited by the Wall Street Journal.

However, yields for the securities have been relatively steady in recent months and even declined slightly. That’s partly because the Federal Reserve said in March it would purchase an essentially unlimited amount of mortgage bonds in an attempt to backstop the credit markets.

Banks have also increased their mortgage bond holdings as they have been flooded with deposits.
Applications for new home loans and refinancing have soared in recent months as pandemic shutdowns ended and interest rates fell.
 

David Goldsmith

All Powerful Moderator
Staff member

It hasn’t been this hard to get a mortgage in six years
An index measuring mortgage availability drops to the lowest level since March 2014, MBA says

Mortgage credit in August was the tightest in more than six years as a weak economy prompted lenders to tighten standards, the Mortgage Bankers Association said in a report on Thursday.
The group’s Mortgage Credit Availability Index fell 4.7% to 120.9 last month, the lowest since March 2014, indicating stricter requirements to get loans. The index plunged from record highs seen in late 2019 after the COVID-19 pandemic caused the worst economic contraction since the Great Depression.
The drop in the availability of credit was “driven by a reduction in supply from both conventional and government segments of the market,” said Joel Kan, an MBA associate vice president.
Measuring credit availability by loan type, the Conforming MCAI that tracks loans backed by Fannie Mae and Freddie Mac fell 8.6% to the lowest in the data series that goes back to 2011, the report said. The Jumbo MCAI measuring high-balance loans fell 8.9%, and the Conventional MCAI that measures loans not backed by the government fell 8.7%.

The Government MCAI that includes mortgages backed by the Federal Housing Administration, the Veterans Administration and the U.S. Department of Agriculture fell by 1.4%, MBA said.
“Credit continues to tighten because of uncertainty still looming around the health of the job market,” Kan said. “A further reduction in loan programs with low credit scores, high LTVs, and reduced documentation requirements also continued to drive the overall decline in credit availability.”
The MBA’s credit availability indices analyze data from Ellie Mae’s AllRegs Market Clarity covering several factors related to borrower eligibility such as credit scores, loan type, and loan-to-value ratios. The data comes from about 95 lenders and investors, MBA said.
Even with tighter standards, the lowest mortgage rates on record will push home lending this year to a 15-year high of $3 trillion, MBA said in an Aug. 20 forecast. Refinancing probably will reach $1.7 trillion, the most since 2003, MBA said.
 
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