Are nonbanks likelier to lend to Black, Latino homebuyers?

A new report from California shows that less-regulated mortgage lenders may be doing a better than banks of serving Black and Latino homebuyers. But consumer advocates say the data bolsters the case for tougher supervision of nonbanks.
Source: American Banker

Rising home prices take a toll on pending home sales

U.S pending home sales fell 1.1% in October – the second consecutive month the index has fallen as affordability strains the market, a recent report from the National Association of Realtors said. However, borrowers are still maintaining a strong pace, as contract signings are up 20.2% compared to a year ago.

According to Joel Kan, the Mortgage Bankers Associations assistant vice president of economic and industry forecasting, that robust year-over-year improvement in activity is a sign the market will continue to see sustained demand for housing through the end of 2020.

“Realtors cited a combination of high demand and low inventory, which are making conditions more competitive and exerting upward pressure on prices. The faster price growth is leading to affordability challenges for certain segments of buyers, and particularly for first-time homebuyers,” Kan said.

Year over year, pending sales are showing promise in every region of the U.S, however, the South was the only area that managed to grow from September – up just .1%. The Midwest dropped 0.7% but remained 19.6% higher than a year ago while the West remained unchanged from last month and 20.8% higher year-over-year.

As talk of an urban exodus continues, the Northeast’s pending home sales slid 5.9% in October – though still 18.5% greater than last year.

How the mortgage industry is working together to make housing more affordable

The issue of housing affordability has no one solution, but with collaboration across the entire housing industry, together we can create more opportunity for more people to achieve sustainable, long-term homeownership.

Presented by: Fannie Mae

With both the inventory of homes for sale and mortgage rates sitting at record lows, NAR chief economist Lawrence Yun said strong demand has pushed home prices to levels that are making it difficult to save for a down payment, especially for first-time buyers who don’t have the luxury of using housing equity from a sale to use as a down payment.

In September, CoreLogic’s Case-Schiller home price index saw the greatest year-over-year gain since 2014, and climbed nearly 23% higher than its last peak in 2006 as multiple economists forecasted prices to continue their upwards growth.

According to Yun, median home prices are rising “much too fast” and that transforming raw land into developable lots and new supply are clearly needed to help tame the home-price growth. At this rate, Yun said even low interest rates have a limit to how much they will help affordability.

Pending home sales looks specifically at contracts that have been signed but where the transaction has not closed on sales of already existing inventory. Because the work-from-home environment has given borrowers the chance to live anywhere, Yun said increased demand for second homes has created strain on the existing homes on the market.

Right now the Census Bureau and Department of Housing and Urban Development estimate a current supply of 3.3 months at the current sales rates as builders attempt to keep up.

The post Rising home prices take a toll on pending home sales appeared first on HousingWire.

Source: HousingWire Magazine

Zions’ Simmons reveals cancer diagnosis

Harris Simmons, the chairman and CEO of Zions Bancorp. in Salt Lake City, said in a letter to employees that he was recently diagnosed with a form of non-Hodgkin’s lymphoma and would be pursuing a treatment plan over the next several months.
Source: American Banker

Week ahead: All about NCUA

The credit union regulator’s budget briefing could produce fireworks, but possible Senate action could make the result of an eventual budget vote a foregone conclusion.
Source: American Banker

It’s official: Yellen is Biden’s pick for Treasury

The incoming administration chose a battle-tested policymaker who can draw on her nearly two decades at the Fed to help rebuild an economy still struggling from the coronavirus pandemic.
Source: American Banker

Comment on History of Home Inspection by Michael Ivy

I agree thank you for the information Mr. Issac it was informative as well as interesting to read thank you for putting in the hard work to bring this to us.

Source: Working RE Magazine

Compass eyes IPO in 2021: report

Venture-backed residential brokerage Compass has hired bookrunners ahead of an independent public offering in 2021, according to a new report.

Compass, most recently valued at $6.4 billion, is working with Goldman Sachs and Morgan Stanley to underwrite the IPO, according to Bloomberg, which cited anonymous sources.

Like other real estate companies of late, SoftBank-backed Compass has benefited from low interest rates and changing consumer behavior that’s driven new home purchases across the country.

Founded in 2012 by Robert Reffkin and Ori Allon, New York-based Compass has raised more than $1.5 billion from blue-chip investors, including SoftBank, Fidelity, Wellington Management, Goldman Sachs, Dragoneer, Canadian Pension Plan Investment Board, IVP, LeFrak and others.

Compass positions itself as a tech-forward brokerage that has gradually branched out beyond brokerage – it offers a concierge service, facilitates bridge loans, has a title-and-escrow arm, and has deployed a bevy of resources into tech centers in Seattle and Hyderabad.

The residential brokerage has also spent heavily to acquire smaller brokerages and top agents in over a dozen markets across the country since its founding, which led to accusations of agent poaching and issuing huge splits and signing bonuses that drove up costs to unsustainable levels.

There are also open questions about how much expansion is possible for the brokerage, which currently boasts more than 18,000 agents and sold over $91 billion worth of property in 2019, according to Real Trends.

In the early days of the pandemic, when lockdowns prevented Compass from showing homes in its strongest market, the brokerage elected to cut 15% of non-agent staff. Compass subsequently rebounded to cash in on record home sales in the summer and into the fall.

Realogy, the largest brokerage conglomerate in the U.S., is currently trading at $12.35 a share, up dramatically from a low of $2.09 in March. Despite its heft, Realogy’s market cap stands at roughly $1.43 billion, less than Compass has raised across several funding rounds.

The post Compass eyes IPO in 2021: report appeared first on HousingWire.

Source: HousingWire Magazine

Industry veterans launch Canopy in bid to shake up residential due diligence space

This article originally appeared in FinLedger, HousingWire’s sister-publication focused on Fintech.

Residential due diligence is an area of the mortgage ecosystem that’s overdue for disruption, according to two industry veterans who want to offer something completely different in the due diligence space through their newly launched company, Canopy.

Canopy CEO John Levonick and COO Andrew DeGood, who cut their teeth at Clayton Holdings in the early 2000s, say that the tech used to perform due diligence today actually introduces friction into the process, especially down the line as loans are bought and sold multiple times. They’ve built Canopy on a cloud native platform with the goal of facilitating easier transactions and providing better data at a lower cost.

In an interview with HousingWire, Levonick explained what he thinks will differentiate Canopy from other due diligence providers.

Of first importance, Levonick said, is that by utilizing the LauraMac platform, Canopy is able to capture and transfer information to capital market participants in a way that doesn’t degrade over time.

“Under current methods, after being bought and sold several times, the loans are so far removed from the first purchaser that due diligence has to be done again — often by the same firm that did it the first time,” Levonick said. “We are looking to conduct due diligence at the consummation of the mortgage for investors, then put that data onto a non-repudiation data base where any subsequent purchaser of that mortgage, if they can prove that they are the holder in due course, can come back and request the initial due diligence results and data sets.”

The technology that originators use now to automate manual functions often has an unintended consequence for due diligence, Levonick said. “You’ve just automated a black box — no one can see it except the original due diligence provider. You can’t go back to the point in time when the due diligence was done, so how do you reverify that over the next 30 years? That’s why it has to be done over and over again.”

Levonick noted that the LauraMac tech platform allows Canopy to provide due diligence on a true fractional basis. Without this technology, Levonick says, a fractional review usually means a due diligence provider will do a full review on every data point, then go in and obscure some results manually to provide a narrow window of data.

“LauraMac gives us the ability to pull out modules independently without having to put in four hours of effort. If the client wants to order just a compliance review, we have the ability to key in data points for compliance, versus all the data points,” Levonick said. “This gives us the agility to serve clients quickly and efficiently — and offer very competitive pricing.”

In addition to traditional due diligence services, Levonick sees potential for leveraging blockchain to support digital assets as an additional/optional element at some point in the future. “What was done [with the loan] goes on the blockchain and it’s based on verifiable data. You don’t have to show the data, you just have to show the logic of the test and how that was fulfilled. Any subsequent holder could prove what was done as if they were the very first investor.

“For example, in reviewing a seven-year-old loan, you might be looking at whether the originator obtained the credit score from Experian. With blockchain, you could see that it was done through an API that was encrypted, and identify the fact that it came from Experian. There is no ambiguity there,” Levonick said.

With Canopy, Levonick and DeGood see an opportunity to change the game for originators, servicers and investors by cutting the cost to acquire loans.

“Due diligence providers occupy that pivotal seat between the primary and secondary market,” Levonick said. “Investors only get what due diligence can provide at a price point they can bear, and up to now technology hasn’t been able to provide better data in a cost-efficient manner. Due diligence in this moment needs to be a friction reducer and better data provider.”

Levonick said Canopy closed a seed round to launch and is open to taking on additional capital, but doesn’t anticipate needing it. “With our lean methodology and knowledge of the industry, we expect to be cash-flow positive in short order. While we leverage technology, we exist as a service provider, not a software company, so we’re not looking for 15x multiples,” he said. “I can’t wait to issue dividend checks to investors in the first year of our existence.”

That confidence comes from a long, varied career in different parts of the mortgage ecosystem. Levonick was a closing manager at Fiserv before becoming senior regulatory counsel and then director of regulatory compliance at Clayton. In addition, he was the director of legal services at Accenture, chief compliance counsel at Opus, and counsel and special counsel at Ballard Spahr and Pepper Hamilton. He has also been a special advisor to OC4, an AWS partner, and is currently a member of the legal working group of the Wall Street Blockchain Alliance.

DeGood has served in senior roles at Consolidated Analytics, Mortgage Industry Advisory Corp., and Allonhill, as well as director of business development at Opus and client service manager at Clayton.

The post Industry veterans launch Canopy in bid to shake up residential due diligence space appeared first on HousingWire.

Source: HousingWire Magazine

Small banks welcome PPP relief but fear it may not be enough

Community banks that were pushed past key asset limits by the Paycheck Protection Program say they will be unable to shrink their balance sheets back to normal size by the 2022 deadline, especially if there is a new round of rescue aid.
Source: American Banker

The best new home sales report ever

Sometimes keeping things simple makes the message more clear. I have been consistent in my stance that during the years 2008 to 2019, we had the weakest housing recovery ever. I said that housing starts would never start a year at 1.5 million until we reached the years 2020-2024. Only then would we see enough demand from the new home sales market to warrant that much construction.

This hasn’t happened yet, but the recent hew home sales report indicates we are getting there.

The Census Bureau reports: “New Home Sales Sales of new single-family houses in October 2020 were at a seasonally adjusted annual rate of 999,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.3% (±13.6%)* below the revised September rate of 1,002,000, but is 41.5% (±22.6%) above the October 2019 estimate of 706,000.” 

Along with the growth in new home sales, the monthly supply for new homes has declined dramatically. This data line has always been my most crucial housing chart to follow, and it has never looked better.

Again from the Census report: “The seasonally adjusted estimate of new houses for sale at the end of October was 278,000. This represents a supply of 3.3 months at the current sales rate.” 

Why is builder confidence at an all-time? Anything below 4.3 months of supply indicates that builders will have the utmost confidence to build. Higher levels of Inventory in the range of 4.4 to 6.4 months indicate slow and steady growth for housing starts, like what we saw from in the previous expansion.

If inventory breaks over 6.5 months, then the market has issues, and builders will likely stall on construction. This happened in 2018 when mortgage rates reached 4.75%  to 5%. I then put the housing market in the penalty box until the supply got below 6.5 months. I warned back then not to assume that the housing market peaked, as better times were just around the corner when we would come into the best housing demographic patch ever during the years 2020 to 2024.

We spent 2019 getting rid of the excess housing supply to end the year flat in housing starts. Now, new home sales are 41.5% year over year and 20.6% year to date.

With all this hoopla, keep in mind that this data will moderate. Also, never forget this sector of our economy is very sensitive to higher mortgage rates, so if the economy gets better, it will impact the new home sales market — all housing data moderates to a more normal demand trend and the recent home sales especially.

The housing market over time is not like toilet paper sales. It doesn’t go parabolic during a hoarding session. Monthly supply level trends are more useful than any single report to gauge the new home sales market’s strength, and it looks great now as the three-month supply trend is currently at 3.33 months.

Unlike March and April, purchase application data is holding up very well, even with the rise in cases. I talked about this recently on HousingWire. Today’s report from the MBA showed a 19% increase in purchase applications year over year — down from last week’s increase of 26% year over year. This will be the 27th straight week of year-over-year growth.

Some were concerned that the recent massive spike in COVID-19 cases would dampen demand like it did in March and April, but we are in a better economic spot now than we were back then. We also now believe that Americans who bought homes during the worse weeks of the pandemic didn’t have any competition and were not outbid.

The entire housing market has changed since that period. While the growth rate can cool down during this period dealing with the spike in Covid19 cases, it won’t be like what we saw earlier in the year.

I wish everyone, including my housing bubble-boy friends, a wonderful Thanksgiving.  We have been through a lot as a country and lost too many fellow Americans due to this virus. The vaccine is around the corner with better treatments, so stay smart and safe and enjoy the holiday.

The post The best new home sales report ever appeared first on HousingWire.

Source: HousingWire Magazine