The Urban Institute‘s Housing Finance Policy Center recently posited that down payment assistance for first-generation homebuyers could help turn the tide of systemic racism by reducing intergenerational wealth disparities.

Researchers said federal, state, and local housing policies have “systematically excluded Black families and other families of color from homeownership,” with one UI study projecting the Black-white homeownership gap – at more than 30 percentage points in 2018 – will continue to grow if current policies stay the same.

The median wealth of white adults’ (aged 18 to 34) parents, $215,000, far exceeds the typical wealth of Black ($14,397) and Latinx ($34,980) young adults’ parents, according to UI researchers.

“First-generation buyers who do buy homes often take on greater debt to do so or delay homeownership for years, making it difficult for homeowners of color to build wealth at the same pace as white homeowners,” said Jung Choi, a senior research associate with the Housing Finance Policy Center.

Janneke Ratcliffe, associate vice president of research and policy at the HFPC, added that in addition to closing the gap between the first mortgage and the cost of buying the home, down payment assistance can leave borrowers with cash reserves for repair needs or other expenses.

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“Because homebuyers borrow less for the first mortgage, down payment assistance can also lead to lower payments and greater home equity when it is a grant or is forgiven over time,” Ratcliffe said.

In an interview with HousingWire in February, Michael Neal, HFPC senior research associate, said homeownership has important implications for family outcomes – and not just through wealth and housing equity.

“We know that homeowners in a particular community tend to have a stronger say and tend to be much more involved in local politics than, say, renters,” Neal said. “So, all of that, I think, is combined and really puts minority homeownership into a very key light.”

According to new research by Morgan Stanley, equalizing Black-white homeownership rates over the next 10 years would create more than 5 million more homeowners of color, generate nearly 800,000 new long-term jobs, and raise up to $400 million in additional tax revenues relative to current trends.

To determine how many people fall under the definition of a first-generation homebuyer, UI imposed an income limit of 120% of the area median income, or AMI, to the 34% of households who currently rent. Data from the survey showed that 35% of renters with incomes up to 120% of the AMI have parents who were not homeowners, and the share is much higher for Black households (65%) than for white households (21%).

UI looked at four different renter groups – besides first-generation homebuyers – that would also be eligible for down payment assistance: renters whose parents also rent; renters who haven’t owned a home in the past three years; renters whose parents and themselves haven’t owned a home in the past three years; and renters whose parents never owned or went from owning to renting in 2007-2013.

The number of potential program participants per category, UI estimates, are 5.37 million, 5 million, 4.37 million, and 2.51 million, respectively.

Of the 5.37 million potentially impacted in the first group, 32% would be Black, 31% would be white, and 27% would be Latinx, according to researchers.

“Without explicit race-based targeting, down payment assistance programs focused on first-generation homebuyers would not fully close the racial homeownership and wealth gaps,” Ratcliffe said. “But, on the other end of the spectrum, down payment assistance programs that don’t consider any structural barriers to homeownership could in fact increase those gaps. Targeting first-generation buyers can address inequities and boost the long-term, intergenerational economic outlook for many families who have historically been denied access to homeownership.”

The post Targeting first-generation homebuyers for financial help appeared first on HousingWire.

Source: HousingWire Magazine

In Lender Letters issued on Thursday, Fannie Mae and Freddie Mac confirmed that loans purchased by the GSEs with application dates on and after July 1, 2021, must meet the standards of the Consumer Financial Protection Bureau’s Revised Qualified Mortgage Rule.

In the letters, the two government sponsored enterprises state that they will follow the directive laid out in their amended Preferred Stock Purchase Agreements with the Treasury Department, which forbid Fannie and Freddie from buying QM loans under the GSE Patch.

The guidelines in the letters stand in contrast to come the CFPB’s most recent notice of proposed rulemaking, which seeks to delay the date lenders have to comply with the revised QM rule until October 1, 2022.

The CFPB final QM rule, issued in December, establishes a pricing threshold that effectively replaced the former debt-to-income limit of 43% with a price-based approach that gives lenders relief for loans capped at 150 basis points above the prime rate.

Before the revised QM was finalized, many lenders were able to circumvent the 43% DTI limit because the rule doesn’t apply to mortgages backed by Fannie Mae and Freddie Mac. This “QM Patch” would expire with the new rule going into effect on July 1. The CFPB threw a wrench into this timeline with their proposed rulemaking, but both Fannie and Freddie are bound by the amended PSPAs with Treasury.

Originally, the QM Patch was set to expire in January, 2021, but in the fall of 2020 the deadline was extended until July. On March 4, the CFPB released it proposed rulemaking, which would push the expiration date another 15 months out.

“Extending the mandatory compliance date of the General QM final rule would allow lenders more time to offer QM loans based on the homeowners’ debt-to-income (DTI) ratio, and not solely based on a pricing cut-off. Extending the compliance date of the General QM final rule would also give lenders more time to use the GSE Patch, which provides QM status to loans that are eligible for sale to Fannie Mae or Freddie Mac,” the Bureau said in its announcement of the proposed rulemaking.

Some mortgage industry groups have opposed the delayed implementation of the finalized QM rule, seeing it as the first step in renegotiating the rule.

In a letter to the CFPB, the Housing Policy Council wrote: “We also are concerned that the Proposed Rule’s real purpose is to set the stage for the Bureau to reopen the 2020 General QM Rule. We firmly believe that reopening the 2020 General QM Rule would not be in the public interest…If the Bureau wants to explore modifications to the 2020 General QM Rule, it should follow the standard APA rulemaking process, without delaying the mandatory compliance date.”

The Lender Letters issued Thursday make it clear that the GSEs will be following the letter of the current revised QM rule unless and until the proposed rulemaking is finalized.

In its Lender Letter, Fannie Mae said it anticipates additional changes in eligibility and underwriting in the following areas:

• The documentation and verification requirements for loans originated under the high LTV refinance option will be updated in light of the Revised QM Rule.
• The calculation of the qualifying payment amount and annual percentage rate (APR) for ARMs with an initial fixed-rate period of five years or less will be updated to require consideration of the maximum rate that may apply in the first five years of the loan.
• All covered loans will be required to comply with the APR to average prime offer rate (APOR) spreads as required by the Revised QM Rule.

The post GSEs won’t buy QM loans under GSE Patch after July 1 appeared first on HousingWire.

Source: HousingWire Magazine

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Over the last several years, non-bank mortgage originators have established a much larger market share. Additionally, non-bank servicers have more than doubled their ownership of servicing rights in the last 10 years. This gives non-bank lenders and servicers significantly greater access to more consumers and provides an opportunity for student lending to make an impact. 

More than ever, non-bank mortgage lenders are looking for stickiness with their customers after their initial origination – and student loans are a great opportunity for this. Student loans can be offered over 4-5 years of matriculation, even on through graduate school, and there remains a large market these days for student loan refinance. Either of those products can help non-bank mortgage lenders stay relevant with their customers after their initial product. 

There’s a lot of seasoning behind student loans, and the loans perform extremely well. Additionally, the application process for students has become seamless and digitized. 

CampusDoor has developed the leading platform for originating student loans, and for the non-bank mortgage lenders coming onboard, the process is very established. Lenders using CampusDoor’s platform can join the marketplace in as little as 30-45 days. 

While the industry prepares for the refinance boom to come to an end, there’s pressure for rates to move upward, which will pull production back. As volumes begin to drop and margins begin to compress, originators are looking for a way to expand their product offerings. Student lending offers an entryway into consumer finance that non-bank originators have not had access to historically.

The post How student lending can benefit non-bank lenders appeared first on HousingWire.

Source: HousingWire Magazine

Better.com has received a $500 million investment from SoftBank that values the digital mortgage lender at about $6 billion, CNBC reports.

Although the news was initially reported by The Wall Street Journal, CNBC confirmed the news later with sources familiar with the matter.

Better’s last funding round was in November 2020 where it was valued at $4 billion, Pitchbook data shows. Better extended $14 billion in loans in Q1 this year, and $25 billion in loans in 2020. The profitable company reaped in $800 million in revenue in 2020, CNBC reports.

Better is expected to go public later this year and SoftBank is purchasing shares from Better’s existing investors, sources told the Wall Street Journal. Better offers home loans for customers through its digital website and partners with banks like Ally Financial.

Better has benefited from the red hot home buying market and the rise in refinancing activity in the past year as interest rates are incredibly low.

The sources told the Wall Street Journal that SoftBank has been in talks with Better about this investment since late 2020 because of the company’s accelerated growth.

SoftBank appears to have an affinity for the proptech industry. According to Crunchbase, SoftBank has participated in proptech deals totaling $19.9 billion across 31 known and publicly announced rounds. The fund has seen Compass recently go public to muted investor interest and Housing.com exit to PropTiger, another one of its proptech investments.

In other recent proptech news, proptech startup GiGstreem has secured $50 million in funding from Fort Worth, Texas-based Crestline Investors that will enable expansion of GiGstreem’s WiFi platform for multifamily and commercial properties.

Also, founded in 2013, CrowdStreet experienced its most successful year ever in 2020, despite a 32% drop in deal volume across the U.S. commercial estate sector versus 2019. The crowdfunding platform attracted more than $640 million in investments across 90 deals last year. In the past seven years, the startup has arranged roughly $1.7 billion in investments via more than 470 projects.

The post Better.com nabs $500 million investment from SoftBank appeared first on HousingWire.

Source: HousingWire Magazine