Mortgage bankers unveil lots of tricks and treats

By Jeff Lazerson

10/27/17

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

Rate news summary

From Freddie Mac’s weekly survey: The 30-year fixed rate averaged 3.94 percent, 6 basis points higher than last week’s 3.88 percent. The 15-year fixed averaged 3.25 percent, also 6 basis points worse than last week’s 3.19 percent.

The Mortgage Bankers Association reported a 4.6 percent decrease in loan application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $424,100 loan, last year’s rate of 3.47 percent and payment of $1,897 was $113 less than this week’s payment of $2,010.

What I see: Locally, well qualified borrowers can get the following fixed-rate mortgages at a zero point cost: A 15-year at 3.25 percent, a 30-year at 3.875 percent, a 15-year agency high-balance ($424,100 to $636,150) at 3.375 percent, a 30-year agency high-balance at 4.0 percent, a 15-year jumbo (over $636,150) at 3.875 percent and a 30-year jumbo at 4.125 percent.

What I think: This past week I journeyed to Denver, the setting for this year’s annual Mortgage Bankers convention. In addition to learning how funny Peyton Manning is, and just how well John Legend sings, I have lots of tricks and treats to share with you.

1) A relatively robust economy and continued home equity growth are behind TransUnion’s expectation consumers will originate approximately 10 million home equity lines of credit in the next five years (2018-2022). That’s more than double the 4.8 million HELOC’s originated from 2012 to 2016. Talk about a treat! Look for lenders to offer you very aggressive pricing.

2) The Mortgage Bankers Association and Fannie Mae both predict total loan volume to be slightly lower in 2018 than their respective estimates of almost $1.7 trillion to almost $1.8 trillion for 2017. Definitely not a treat.

3) The MBA thinks 30-year fixed rates will average 4.6 percent in 2018 while Fannie Mae is thinking one-half point lower at 4.1 percent. Could be a trick?

4) Where is the economy headed? “There is a high probability of a recession in the next 12 to 24 months,” said Fannie Mae’s chief Economist Doug Duncan. It’s definitely a treat to be aware of the spookiness that may be lurking around the corner.

5) At the 2016 convention Fannie Mae introduced Day 1 Certainty, seeking to make the loan process faster and more convenient for consumers by allowing Fannie to verify information on your behalf. Last year I wrote that you’d have to be crazy to give up your bank account pass codes so Fannie could retrieve and validate your asset information. The Equifax breach is a perfect example of our vulnerabilities.

This year Fannie announced a pilot to validate your income, assets and employment through a single report. Fannie claims Day 1 Certainty is so successful that in the last year, a thousand or more lenders have signed up for it, driving 74 percent of its loan volume.

This leaves me scratching my head. In the last year, exactly one borrower of mine was approached by a lender (selling to Fannie) asking for his bank password. The borrower said, “No!” Other than that, I don’t observe this being discussed by my mortgage loan officer peer group, nor is it being promoted by the Fannie Mae lenders in which I send loans. Tricky for sure.

6) I wrote about Freddie Mac’s tax return calculation process that some Freddie folks shared with me at last year’s Boston convention. Well, we’re still waiting for its release. A Freddie spokesman said he still has no idea of the timing of the income verification release.

Not to worry. “We are going live with Freddie on April 1(2018),” said Kirk Donaldson, president of Orange County-based Loan Beam, which recently announced the integration of its automated income calculation process with Freddie Mac. Now that’s a treat!

If you have questions or comments, please contact Jeff Lazerson by clicking here.