Vaultedge Newsletter - Market will get worse...then get better?

July 11, 2022

The world was not happy this week. UK’s PM Boris Johnson resigned amidst scandals and without a successor in sight. Former Japanese Premier, Shinzo-Abe was assassinated during a campaign speech on Friday. Despite the strict gun laws in Japan, it comes as a shock that the gunman had easy access to arms. And back home, non-QM giant Sprout Mortgage shut its doors permanently and let around 600 employees go over a country-wide phone call. This is a stark contrast to what the non-QM market is experiencing today. The market is a $100 billion industry and Sprout could have become No.1 in the non-QM category. But it decided to become insolvent. Phew! Really a nasty week.

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Well, have you noticed when something has to become better, the worst starts overpowering somehow? Like when you plan to take your spouse out on a date after a hectic week and the babysitter falls ill suddenly? And you have to cancel the plan (your spouse’s anger is another story). This is the case with the housing market correction. A Redfin report shows a year-over-year decline of 16%—the largest decrease in over two years—as 30-year mortgage rates near 6%. Cities with the hottest housing markets-Austin, Sacramento are cooling down. Economists are predicting at the very least, that prices will continue to drop in most markets.

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The good news is that lenders are now using rent data more in making credit decisions. This data is available from credit bureaus and other data sources. Fannie and Freddie are willing to purchase loans made from the use of this data, provided that lenders obtain consumer consent and that they only use the data in a positive way. Tenants of color are disproportionately being affected by evictions. There have been cases where if a tenant has put money into his new home and decides to leave the rental, the landlord demands an extra month’s rent claiming that the tenant hadn’t been notified on time. And these kinds of information pieces traverse to the credit bureau tarnishing the tenant’s credit repute. The biggest concern of tenants is that landlords consolidate and become bigger and more powerful.

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Most mortgage companies have incorporated diversity and inclusion into their organizational structure. Despite the phenomenal strides that the industry has made in this sphere, the destination is a bit far. Often people like doing business who look like them, Cindy Nassar, chief operating officer of PCV Murcor mentioned at the Women of Influence panel discussion. ‘They’re interconnected - as soon as the inside starts to look different than the outside. It needs to be intentional about marketing to those communities. If mortgage companies aren’t in these neighborhoods or aren’t marketing to these individuals, then it’s not going to change’, Nassar added. This reminds me of a quote by Mahatma Gandhi- ‘Be the change you wish to see in the world’. Even before regulations are made about diversity and inclusion, the feeling should come from within. People who have been discriminated against for a long time and denied affordable housing have to be given hope and it’s the responsibility of each member of the fraternity who has the power to change things.

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Mondays are usually dreaded by almost half of the world’s population. It is supposed to be the most melancholic day of the week. Especially when you have had a great weekend, reverting to the same drudgery, can be painful. Think about underwriters. They must absolutely detest pouring over 100s of documents to classify a borrower, especially on Monday. We understood and created our Vaultedge Income Analyzer that reduces the income analysis task by 80% with 99+% accuracy. If you think we are exaggerating, then please request a demo. We will be happy to demonstrate the capabilities.

Happy reading!

Sprout Mortgage was averaging $380 million a month in loan volume before it abruptly shut down on Wednesday. That's the word from a former executive who thought "everything was going great" and was blindsided when the company closed.

The housing market correction has begun, and it will likely get worse before it gets better. According to Redfin's June 23 Homebuyer Demand Index, the market posted a year-over-year decline of 16%—the largest decrease in over two years...

Lenders are now using rent data more in credit decisions. The data itself is increasingly available from credit bureaus and other data providers, and Fannie Mae and Freddie Mac are now willing to purchase loans made from the use of this data

“You have to give people hope. And the only way that you’re going to introduce people to this industry is that the people that are in the industry have to be out there showing them and teaching them about it..."

Consumer Frustration isn’t just reserved for the gas pump and the grocery store. Now you can add the housing market. According to Fannie Mae, the June Home Purchase Sentiment Index decreased 3.4 points to 64.8, its second-lowest reading in a decade.