Fannie Mae, Freddie Mac tighten some standards, loosen others amid coronavirus crisis

With the coronavirus continuing to wreak havoc across the
country, the nation’s two largest sources of mortgage funding are taking additional
steps to address issues that currently exist within the lending process.

Fannie Mae and Freddie Mac announced Tuesday that they are tightening some lending standards while also beginning to offer several “loan processing flexibilities.”

Several of the changes announced by the GSEs address potential concerns surrounding proof of income and assets, two things that can, unfortunately, change rather quickly for some borrowers right now.

According to both of the GSEs, they are changing the age of document requirements for most income and asset documentation from four months to two months. What that means is all income and asset documentation must be dated no more than 60 days from the date of the mortgage note.

Previously, that window was 120 days.

In Fannie Mae’s announcement, it states that the change is being
made “in order to ensure that the most up-to-date information is being
considered to support the borrower’s ability to repay.”

Beyond that, the GSEs are also making changes to their income verification requirements for self-employed borrowers. Under the GSEs current policies, when a borrower is using self-employment income to qualify for a mortgage, the lender must verify the existence of the borrower’s business no more than 120 days prior to the note date.

But that time period is changing from 120 days to 10 days.

“Due to the impact the COVID-19 pandemic and the various social distancing measures implemented by different jurisdictions are having on many businesses across the country, Sellers must now take additional steps to confirm that the Borrower’s business is open and operating within 10 Business Days prior to the Note Date,” Freddie Mac said.

According to the GSEs, lenders will need to verify a borrower’s business is still open using the methods below, or other means:

  • Evidence of current work (e.g., executed contracts or signed invoices that indicate the business is operating on the day the Seller verifies self-employment)
  • Evidence of current business receipts within 10 Business Days of the Note Date (e.g., payment for services performed)
  • The Seller certification the business is open and operating (e.g., the Seller confirmed through a phone call or other means)
  • Business website demonstrating activity supporting current business operations (e.g., timely appointments for estimates or service can be scheduled)

The GSEs are also making changes to their policies on stocks,
stock options and mutual funds.

Fannie Mae explains:

In light of current market volatility, we are making the following updates when the borrower is using stocks, stock options, or mutual funds for assets: When used for down payment or closing costs, evidence of the borrower’s actual receipt of funds realized from the sale or liquidation must be documented in all cases; when used for reserves, only 70% of the value of the asset must be considered, and liquidation is not required.

According to the GSEs, these “temporary credit underwriting
requirements” are effective for mortgages with application dates on or after
April 14, 2020, and remain in place for Mortgages with application dates on or
before May 17, 2020; but lenders are “encouraged to apply these updates to
existing loans in process.”

Meanwhile, the GSEs are making changes to ease lending standards in other areas. According to the Federal Housing Finance Agency, the flexibilities include:

  • Allowing desktop appraisals on new construction loans
  • Allowing flexibility on demonstrating construction has been completed (alternative to the Completion Report)
  • Allowing flexibility for borrowers to provide documentation (rather than requiring an inspection) to allow renovation disbursements (draws)
  • Expanding the use of power of attorney and remote online notarizations

“These loan processing flexibilities will expedite loan closings and help keep homebuyers, sellers, and appraisers safe during this national emergency,” FHFA Director Mark Calabria said.

The changes come just over a week after the GSEs announced they were easing their standards for property appraisals and verification of employment as part of a growing effort to ensure lending can continue under these extraordinary circumstances.

Now, the GSEs are making more changes. As referenced above, some of the most notable changes include “flexibilities” around appraisals of new construction.

Freddie Mac explains:

For new construction properties, where the appraisal was completed “subject to completion per plans and specifications,” including properties that were fully completed after the effective date of the appraisal, and an interior and exterior inspection appraisal cannot be completed, Freddie Mac will permit a desktop appraisal.

For much more on all the changes, click here for more information from Freddie Mac. Click here and here for more information from Fannie Mae.

The post Fannie Mae, Freddie Mac tighten some standards, loosen others amid coronavirus crisis appeared first on HousingWire.

Source: HousingWire Magazine

Mortgage tech virtual demo day set for Friday

More than ever, lenders and others in the mortgage industry are looking for cutting-edge fintech to cultivate borrower relationships, streamline their processes and keep business flowing.

To help sharpen industry decision makers’ toolboxes, HousingWire will hold its first virtual demo day this Friday. The half-day afternoon format, which is free to attend, features platform demonstrations from 14 innovative tech companies. Attendees can tune in for the whole day or drop in on particular sessions.

The agenda is broken into five topics: borrower relationships and leads, loan origination process, processing and underwriting, eclose and fulfillment, and business intelligence and risk management.

Here’s an overview of each technology:

Borrower relationships and leads

Volly simplifies lending technology and marketing automation for banks and mortgage companies, including several of the top 20 lenders in the nation. Its streamlined point-of-sale product features a mobile app and integrated services.

Surefire by Top of Mind is a customer relationship management (CRM) and marketing automation platform that cultivates borrowers from prospects to lifetime customers.

Homebot, a 2019 HW Tech100 winner, delivers personalized, actionable intelligence throughout the entire homeownership lifecycle to every client and prospect, maximizing repeat and referral business. With an average 50% monthly engagement rate, Homebot ensures lenders and real estate professionals remain the trusted advisors to their databases.

Loan Origination Process

Ellie Mae is the leading loan origination platform provider for the residential mortgage industry. Through its Encompass Consumer Connect, lenders can create an online experience for borrowers to easily complete applications, securely upload documents and eSign, and order services. And its newest consumer engagement product, Velocify LeadManager Essentials, provides consistent, automated communication between a borrower and the loan officer.

Blend’s end-to-end digital mortgage platform merges financial data from trusted sources to streamline pre-approvals, disclosures, conditions and eClosings. Blend also is demonstrating its home equity platform, a mobile-first experience that accelerates the HELOC and HELOAN origination process, at a separate time on Friday.

Optimal Blue’s Marketplace Platform connects the industry’s largest network of originators, investors, and providers. More than $750 billion in transactions are processed across the platform each year, facilitating a broad set of secondary market interactions like pricing, locking, hedging and trading of mortgage loans. 

Process and Underwriting

Global DMS’ appraisal management software, called EVO, delivers a fully configurable workflow design of new fields, forms and reports without the need for custom development.

FirstClose, a 2020 HW Tech100 winner, provides property and borrower data intelligence and settlement services nationwide. Its web app and LOS plug-in are the industry’s first and only home equity and refi tool that covers application to servicing (credit score, valuation, title, tax, flood, closing and recording) on one platform.

FormFree‘s products AccountChek and Passport focus on automated asset verification. FormFree offers borrowers and lenders a paperless experience, reduces origination timelines by up to 20 days and delivers automated analysis and standardized delivery to lenders and investors using a secure ReIssueKey.

eClose and Fulfillment

DocMagic will demo AutoPrep, its new technology that leverages artificial intelligence and machine learning to change standard documents into e-enabled documents in less than 10 seconds. AutoPrep scans and parses documents, locates all areas required for signature, then tags them for eClosing – all 100 percent paperless.

Snapdocs connects lenders, title companies and notary signing agents via its digital closing platform so each can efficiently manage their closings. Powering over 1 million closings annually, Snapdocs creates a single, scalable process for every closing, whether wet, hybrid, or fully eClose.

Business Intelligence and Risk Management

Indecomm provides automation, outsourcing, compliance, and learning to large and mid-sized lenders, servicers, and title companies. AuditGenius is Indecomm’s proprietary, web-based SaaS solution to simplify the loan audit process for effective and efficient mortgage risk management.

Richey May‘s RM Analyze is a business intelligence platform for mortgage lenders, connecting to LOS, CRM, HRIS, P&L systems and more for up-to-date reports and distribution.

Capacity is an AI-powered support automation platform that allows mortgage professionals to tap into key systems like Ellie Mae, Encompass, and AllRegs and provide real-time access throughout the entire loan life cycle. Capacity connects apps, mines documents, captures tacit knowledge, and automates processes — all through a mobile-friendly chat interface.

Register now for HousingWire’s Mortgage Tech Virtual Demo Day, running from noon to 5 p.m. EST on Friday, April 3.

The post Mortgage tech virtual demo day set for Friday appeared first on HousingWire.

Source: HousingWire Magazine

Emergency loan program to accept applications on Friday

The Treasury Department and Small Business Administration are responsible for distributing $350 billion in coming months.
Source: American Banker

Ryan Lundquist answers five questions on appraisal uncertainty during the COVID-19 pandemic

As the COVID-19 pandemic heightens in the U.S., more and more local governments have begun to issue stay-at-home orders, which has directly impacted the nation’s real estate industry, as workers encounter restrictions to their typical operations. This has created mounting concerns for appraisers, who are typically required to enter client’s homes. HousingWire filmed an interview with Lundquist Appraisal Company’s founder and owner Ryan Lundquist to gauge how appraisers are navigating this period of uncertainty.

Below you will
find two of the five questions HousingWire asked Lundquist, with the full video

This interview has been lightly edited
for length and clarity.

HW: Without current market sale comps, how do current market conditions affect the appraisal process? 

Ryan Lundquist:  Here’s the thing, comps are always dated. Say something sold in late March 2020, it doesn’t really tell me about the market in March 2020, it tells me what the market was like when these properties got into contract in February or January. So, we always have this problem in the valuation space where anything that’s sold doesn’t really tell us about right now. It’s like a historical artifact that tells us about the past, and so I would say the most accurate way to get a sense of the market is to look at the listings and what’s getting into contract right now, what is happening with the listings, and what’s happening with the pendings. Appraisers really have to give strong attention to that in order to really get a sense of what is the current market doing. That’s where we will absolutely see the market beginning to change or whether it’s going up or going down.

HW: What are some appraisal alternatives to inspecting a home during this time?

Ryan Lundquist: There are appraisal alternatives. There’s always been products like desktop appraisal, where an appraiser does an evaluation without leaving his or her desk and will do the analysis based on information from public records, or maybe information from Realtors on MLS with photos and such. There are also drive-by appraisals, also known as exterior appraisals, which is when an appraiser drives by a property and looks at the outside and relies on information from tax records, making assumptions the square footage is correct and the bath count is correct. They do appraisal, but it’s just based on more limited information. There’s also a lot of talk these days about appraisers using a little bit more information with products from Realtors, especially with the virus outbreak. Appraisers are also doing a lot of talking with clients through FaceTime, or the Google duo app and having an owner walk through a home with video, which I think is innovative.

For more filmed interviews from HousingWire, watch this video interview with Finance of America Mortgage’s President Bill Dallas about how lenders can navigate the uncertainties in the mortgage industry amid the COVID-19 pandemic.

Watch the full video interview with Ryan Lundquist below.

The rest of this content is for HW+ members. Join today with a HW+ Membership! Already a member? log in

The post Ryan Lundquist answers five questions on appraisal uncertainty during the COVID-19 pandemic appeared first on HousingWire.

Source: HousingWire Magazine

How far this recession could drive down purchase mortgage applications

In so many ways, 2020 had an outperforming start to the year. 

This was especially true of the U.S. housing market. From the second week of January to the first week of March –– when most of the activity occurs in the housing market –– purchase applications were up double digits every week.

That is, until last week when applications were down 11% compared to the same time last year. And so it begins.

Logan Mohtashami
Logan Mohtashami, Columnist

An 11% decline year over year may not seem like much, especially considering what else is going on in the economic markets, but keep in mind that when the report on purchase applications data was released, jobless claims hadn’t spiked to near 3.3 million.

What a difference a week makes.

The last existing home sales report was at a 13-year high, 300,000 sales above my highest range forecast for 2020. The last report showed 8% year-over-year growth in home prices. Even the recent pending home sales report this week showed 2.4% growth month to month and 9.4% growth year over year.

But times have changed. 

What to keep in mind when looking at Q1 reports:

For those keeping track, the exact date of the last good jobless claims report was March 12.

That is also the date the government issued stay-at-home protocols started in many communities, banning any event of more than 50 people.  Prior to that, we saw a lot of cancelations of conventions and other large events, but the economy as a whole had not yet “hit the fan.”

On March 18, purchase applications were still positive year over year, but more and more states were going into stay-at-home mode. California issued statewide stay-at-home orders on March 20. From March 18 to March 25, we saw a nationwide decrease of 22% in the application data, from plus 11% to -11% compared to last year. (See graph below.)


Because some states –– like California –– didn’t issue stay-at-home orders until March 20, this last report only reflects some days of the “virus” effect. 

The next existing home sales report will be for the month of March and, therefore, will not show the full impact of the virus because stay-at-home protocols were not in effect until mid-to-late March in many areas. By April, we should see data that reflects the full impact of the nationwide social lockdown. 

I would not be surprised to see some weeks of purchase application data down 54% or more, compared to last year. As drastic as this sounds, it would be in line with the declines in other consumption data lines. Opentable, the restaurant reservation service, for example, has had some prints that were negative 100%, compared to last year.

For some context, the last time purchase applications were down during the most active months was in 2014.

Back then, higher interest rates drove applications down 20% on-trend compared to the previous year. The existing home sales ended the year at 4,940,000 homes sold vs. more than 5 million in 2013, so there was not a big loss in sales year over year. 

Two major hurdles for the housing market

However, the issue now isn’t about higher mortgage rates, even though they’re higher from recent all-time lows. More than half the country is prohibited from going to open houses. A block on the initial step to homeownership could bring the whole process to a screeching halt for some.

Social constraints are shutting down the economy and leading us into a recession that started in March, but fortunately, this virus won’t be with us forever. Once we are allowed to socialize normally again, we will still have great demographics for the housing market along with low mortgage rates.

A second problem for the housing market, that is smaller in scope and less immediate but will outlast the release from social distancing, is the decimation of the non-QM lending market. Many, if not most, of the non-QM lenders have gone out of business due to tightened credit.

Without these lenders, loans that allow for higher debt-to-income ratios, bank statement loans and niche loans for the jumbo market will be much harder to find. Even the FHA is tightening its lending standards for higher-risk clients.

I estimate that 4.5%-6.2% of loans that could have been done before March 9 now cannot be done. This percentage may increase as lenders raise their standards on the higher risk borrowers. Unlike mortgage rates that can change overnight, credit standards take much longer to adjust, so this tightening of credit may stay with us for some time.

Needless to say, many sectors of the economy, even outside of the housing market, have suffered parabolic drops due to the virtual shutdown of the country.  The big, horrible news last week was that jobless claims spiked to near 3.3 million. The St. Louis Stress index, is a measure of financial stress in the markets and hadn’t gone above 1.25% since the great recession. It spiked to 5.79 on March 20. (See below)


Even when communities are released from stay-at-home orders and are able to resume normal business, I suspect it will take an additional 30 days before we will see a noticeable rebound in the purchase application data. 

Here’s the good news

Last weekend, real estate was added to the list of essential industries in California. Now real estate transactions are allowed to resume, but it remains to be seen if folks will feel comfortable buying homes during a national shutdown of the economy. 

Be on the lookout for more positive announcements regarding what will be allowed during the lockdown to facilitate real estate transactions, such as easing of social distancing rules. 

Plus, the biggest demographic patch ever in U.S. history of ages 26-32, is about to emerge for first time home buying. Before the virus hit, we had over 160,000,000 people working. The new disaster relief package of $2 trillion will help bridge the economic gap. The government is spending a lot of money to keep people employed and paid while our country and the entire world fight this crisis. 

Even with the $6 trillion of disaster relief, fiscal and monetary combined, we won’t return to our normal economic activity and growth until we are released from stay-at-home protocols.

This too shall pass. I expect the U.S. to return to the same slow and steady growth it has had since 2009. The pre-coronavirus economy in the U.S. was the longest economic and job expansion ever recorded in history. It took a global virus pandemic with government shutdown protocols to create this recession. 

Now we have a lot of work to do to destroy this virus.  But make no mistake, the American people have the strength, power, work ethic and conviction to defeat this.

The post How far this recession could drive down purchase mortgage applications appeared first on HousingWire.

Source: HousingWire Magazine

Banks put job cuts — and more — on hold during coronavirus outbreak

While some big banks have pledged to avoid layoffs this year, hiring freezes and delayed projects are becoming the norm during the pandemic.
Source: American Banker

Goldman Sachs predicts unemployment will hit 15% this year

The coronavirus crisis and the subsequent national shutdown
has already impacted employment in ways never seen before, but it’s likely that
things will get worse before they get better.

The most recent data from the Department of Labor showed that 3.28 million people filed for unemployment in the week ending March 21, 2020. That figure absolutely shattered the previous weekly high of 695,000 initial jobless claims, which was set in 1982.

Data like that is why Goldman Sachs economists now say the unemployment rate could climb to a record 15% this year.

That’s an increase from the 9% unemployment those same economists were predicting earlier this month, and a far cry from their February prediction that unemployment would fall to a 67-year low this year.

As the virus’ reach and impact have deepened over the last few weeks, Goldman Sachs economists predict unemployment will skyrocket from the 3.5% where it stood in February.

“These forecast changes reflect the net effect of two directionally offsetting changes,” the Goldman Sachs economists wrote. “On the one hand, the anecdotal evidence and the sky-high jobless claims numbers show an even bigger output and (especially) labor market collapse than we had anticipated. This not only means deeper negatives in the very near term but also raises the specter of more adverse second-round effects on income and spending a bit further down the road.”

Goldman Sachs and other economists suggest that the unprecedented rise in unemployment is due to the outsized impact of the shutdown on the service industry, those whose jobs cannot be done remotely.

“Unfortunately, the service industry – hospitality, retail
and leisure specifically – will likely feel the sharpest and most immediate
economic pain from the coronavirus outbreak,” First American Chief
Economist Mark Fleming wrote in a report this week. “There are over 130 million
workers in the overall service sector, which accounts for 86 percent of total
nonfarm employment, so job losses are expected to be high in this
labor-intensive sector.”

That’s a recipe for record-breaking levels of unemployment.

Of course, Goldman Sachs’ predictions are modest compared to those of Federal Reserve Bank of St. Louis President James Bullard, who recently told Bloomberg that unemployment could climb to 30%.

Goldman Sachs suggests that the current climate should be a relatively short-lived one.

“Both monetary and fiscal policy are easing dramatically further, which will tend to contain these second-round effects and add to growth down the road,” the economists wrote of the steps the federal government and Federal Reserve have taken in recent days to stem the downturn.

“We have not made major changes in our assumptions on the time path of the recovery,” the report said. “While the uncertainty is substantial, we expect the lockdowns and social distancing to result in sharply lower new infections over the next month, and our baseline is that slower virus spread and adaptation by businesses and individuals should set the stage for a gradual recovery in output starting in May/June.”

The post Goldman Sachs predicts unemployment will hit 15% this year appeared first on HousingWire.

Source: HousingWire Magazine

Digital training for bankers paying off in coronavirus crisis

Customers are more reliant than ever on digital banking tools, and institutions like OceanFirst, BBVA and M&T are thankful they had invested in teaching employees to show customers how to use them.
Source: American Banker

High anxiety among energy lenders as oil prices plummet

Weak demand for oil and gas, brought on by the economic fallout of the coronavirus outbreak, has raised concerns of energy firms missing loan payments or even going bankrupt. Here’s how banks and regulators are trying to get ahead of potential problems.
Source: American Banker pivots to virtual summit

During this very challenging time, mortgage and real estate professionals are working hard to keep the economic engine of housing running smoothly.

Lenders are working around the clock to help consumers refinance their loans, servicers are gearing up to provide mortgage forbearance, and real estate pros are pivoting to virtual open houses and remote online notarizations. It’s a time that demands a flexible, innovative approach from all parties, including marketers.

That’s why we’ve designed our third annual summit around The Agile Marketer. The concept of agile may have begun in the IT department, but innovative businesses are applying agile principles across their organizations to great effect. Agile marketing requires collaboration across teams, nimble creative execution and the ability to pivot quickly when priorities or market conditions shift.

At HousingWire, we’re leaning into agile marketing ourselves, pivoting to a virtual format for on June 11-12. We’ll be delivering all the energy, expert insights and connection you expect from an engage event through a platform that keeps everyone safe.

We understand the challenges facing mortgage and real estate
right now, and we’re lining up expert speakers to tackle agile execution on the
topics you need most, including:

  • How
    to make marketing a revenue center
  • How
    to maximize marketing’s influence as it integrates more with internal teams
    like sales and the C-suite 
  • The
    latest trends in social 
  • How
    to build a mortgage tech stack
  • Using
    video across platforms
  • Partnering
    with lead aggregators to supplement your business after the refi boom
  • Maximizing
    the Lender/Realtor relationship
  • Marketing
    in an economic downturn

We’ll also be hosting master class segments on branding and
voice from the industry’s best, as well as breakout sessions to showcase
innovative tech solutions.

It’s going to be a don’t-miss event for marketers as we all work our way through an altered landscape of home buying and selling. Join us by registering here.

The post pivots to virtual summit appeared first on HousingWire.

Source: HousingWire Magazine