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Vaultedge Newsletter - Potential home buyers still exist amidst rising rates

August 30, 2022

Rob Chrisman posed an interesting question in his Saturday newsletter. How do we make decisions regarding buying or selling anything? This has to do with more than just a description of a product or the offering. Consumer psychology says that people often tend to make purchases based on emotions. This could be pride, vanity, comfort, jealousy, and so on. What I have learned in my journey as an entrepreneur and interacting with my prospects and clients is that everyone looks for one particular thing apart from the myriad of parameters is trust. How do you build trust when you have just met? Do you talk about reliability, transparency, authenticity, and proactiveness? Or, is there something more? I feel trust is core to the entire buying-selling process. Without it, wooing clients becomes extremely tedious, almost impossible. How do you get people to trust you then? One of the ways I have found after a lot of research is that people look up to a brand leader and an affiliation with it can help quite a bit in earning a client’s trust.

We recently announced our integration with Encompass® by ICE Mortgage Technology. So, you can get your work done twice as fast and with complete accuracy. Encompass has been a trusted leader in the loan origination software industry for a very long time and our integration with them seemed like the next logical step. We have crafted a new video that talks about the seamless integration between Encompass LOS and Vaultedge OCR. Check it out.

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The combination of increasing market rates and a sluggish economic environment has led to a diminishing housing market. There is a steep decline in home sales, people are still skeptical about making a purchase. Despite such situations, there are potential homebuyers who are ready to take a plunge. Mortgage rates continue to fluctuate, with the average 30-year fixed-rate home loan swinging back up to 5.55%. The long-term mortgage rate jumped 42 basis points from last week to a two-month high of 5.55%, according to Freddie Mac’s Primary Mortgage Market Survey. A year ago, at this time, the 30-year mortgage was 2.87%.

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According to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 19, 2022 Mortgage applications decreased 1.2 percent. Mortgage applications continued to remain at a 22-year low, held down by extremely diminished refinancing demand and inefficient home purchase activity. The previous week’s purchase results varied, with conventional applications declining 2 percent and government applications increasing 4 percent, which is potentially a sign of more first-time homebuyer activity. The average purchase loan size continued to trend lower, as purchase activity at the high end of the market weakened.

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ARMs or Adjustable-rate mortgages are becoming quite popular as home buyers scout for various ways to save money considering the high interest rates. According to a new Zillow study, borrowers using ARMs are more likely to be the wealthy section with significant down payments. The reason why ARMs are so popular is because they usually offer a lower interest rate than a standard 30-year, fixed-rate mortgage during the introductory period — ranging from three to 10 years — which is appealing when mortgage rates hit the roof. The interest rate on an ARM loan can rise or fall after the introductory period expires, bringing some long-term uncertainty for the borrower. 

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Reacting to reports that suggest Wells Fargo may abandon the corresponding lending sector, a company’s executive sent an email to clients last week stating that since correspondent has been an essential part of Wells Fargo home lending’s success and continues to play a key role as they adapt to a changing industry and there is no intention of leaving the sector. The idea that Wells Fargo would abandon correspondent lending, first reported by Bloomberg, said Wells Fargo executives “plan to shrink its vast mortgage empire, which once churned out one of every three home loans in the U.S. and for a time made the bank the most valuable in the nation."

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Flagstar continues its partnership with Black Knight MSP loan servicing system. The executive vice president of the company said that Black Knight has been quite helpful in terms of being scalable and reliable for a growing MSP market. Flagstar Bank has also renewed its contract to use Black Knight’s full suite of default solutions to help streamline processes for nonperforming loans and manage loss mitigation processes. The bank is a current user of Black Knight’s product, pricing and eligibility engine, as well as its marketing automation tool.

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The mortgage denial rate for Black borrowers is twice that of the overall population of borrowers in the largest 50 metropolitan areas in the U.S., according to a new report from LendingTree. Some cities fared better in narrowing the discrepancy between rejection rates for Black borrowers and the overall population. “The problem does exist,” said Jacob Channel, senior economist at LendingTree. “We have data that backs that up. “But there are solutions, and Black homebuyers shouldn’t lose faith that they’ll never be able to become homeowners,” he said.

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What has been your inspiration for striving through this week? For me, it was a compliment that a client had given about being ‘always available’. I really pride myself on being reliable. This has been my characteristic for as long as I can remember. Well, my week went excellently. How about yours? Do drop in a line.

Happy reading!

"There are still potential homebuyers on the sidelines waiting to jump back into the market". Mortgage rates continue to fluctuate, with the average 30-year fixed-rate home loan swinging back up to 5.55% as the once-robust housing market weakens.

Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 19, 2022.

Homebuyer affordability improved for the second straight month in July, with the national median payment applied for by applicants decreasing to $1,844 from $1,893 in June.

Adjustable-rate mortgages (ARMs) are becoming more common as home buyers hunt for ways to save money with today's higher mortgage rates.  The result is that borrowers using ARMs are more likely to be affluent households with larger down payments, a new Zillow analysis finds, adding that this reduces the risk of a housing market crash.

An estimated $500 billion in bulk mortgage servicing rights were sold during the first half of 2022, but transfer times are lagging by upwards of two months or more, according to investment bankers who ply their trade in the space.

In the first quarter, nonbanks once again increased their grip on the Fannie Mae/Freddie Mac servicing market, according to a new ranking and analysis by Inside the GSEs. Some $6.28 trillion of loans were outstanding in Fannie/Freddie MBS at March 31, a 2.9% increase from year-end.

Wells Fargo has no intention of abandoning the corresponding lending sector, company executives say.

Reacting to reports that suggest the nation's third-largest bank may leave the sector, a Wells Fargo executive sent an email to clients last week stating that “Correspondent has been an essential part of Wells Fargo Home Lending’s success and continues to play a key role as we adapt to a changing industry.”

The company determined the best course of action was to close. “Active real estate transactions will continue to be supported through the end of the year by a small team of employees,” Reali said in a statement.

Flagstar Bank has also renewed its contract to use Black Knight’s full suite of default solutions to help streamline processes for nonperforming loans and manage loss mitigation processes. The bank is a current user of Black Knight’s product, pricing and eligibility engine, as well as its marketing automation tool.

Wholesale giant announces pricing bonus for borrowers in underserved zip codes. It is out to capture market share amid a rising mortgage-rate environment with a new pricing bonus.

Progress in giving aspiring Black homebuyers more equal footing compared to the overall population has been slow and incremental, one expert says.