Mortgage Banker Magazine March/April 2022

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CASH

is KING MORTGAGE LENDERS REPOSITIONING ASSETS TO SURVIVE MARKET TURBULENCE A PUBL I C ATI O N O F A M E R IC AN B U S IN ES S M ED IA

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REGULATORY CORNER FEDERAL COMPLIANCE FANNIE: ‘SOFT LANDING’ APPEARS INCREASINGLY UNLIKELY

Expectations of aggressive monetary policy tightening through 2023 by the Federal Reserve are likely to further soften economic output already being weighed down by decades-high inflation and the ongoing effects stemming from the Russian invasion of Ukraine, according to the April 2022 commentary from the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group.

The ESR Group’s latest forecast includes downgrades of 0.2 and 2.4 percentage points, respectively, to 2022 and 2023 real GDP growth, including an expectation of a period of modest contraction in the second half of 2023. The forecast notes that the projected downturn is not expected to resemble the severity or duration of the Great Recession due to multiple factors, including, from a housing market perspective, stronger mortgage credit quality, a far lessleveraged residential real estate and mortgage finance system, and a better equipped mortgage servicer and public policy apparatus, as well as ongoing housing supply constraints relative to demographic demand for housing.

FREDDIE: SOCIAL BOND OFFERING HELPING SENIORS

Freddie Mac Multifamily said that it will soon go to market with the issuance of $92.8 million in Social Bonds supporting 1,500 units across four seniors housing properties in Arizona.

More than half the units are affordable to seniors with incomes at or below 50% of area median income according to Freddie Mac’s affordability guidelines.

“Freddie Mac is committed to supporting affordable multifamily seniors housing through this social bond issuance,” said Robert Koontz, senior vice president of Freddie Mac Multifamily Capital Markets. “We continue to use our innovative execution paths to support our affordable housing mission and provide investors the opportunity to do so as well.”

The loans originated by Berkadia Seniors Housing & Healthcare are for properties owned by Christian Care, which is the largest provider of non-profit seniors housing and healthcare services in Arizona. Christian Care focuses on providing housing for low- and moderate-income seniors.

STAFF

Vincent M. Valvo CEO, PUBLISHER, EDITOR-IN-CHIEF Beverly Bolnick ASSOCIATE PUBLISHER Christine Stuart EDITORIAL DIRECTOR David Krechevsky EDITOR Keith Griffin SENIOR EDITOR Mike Savino HEAD OF MULTIMEDIA Katie Jensen, Steven Goode, Douglas Page, Sarah Wolak STAFF WRITERS Rob Chrisman, Dave Hershman, Erica LaCentra, Nick Roberson, Lew Sichelman, Mary Kay Scully, CONTRIBUTING WRITERS Alison Valvo DIRECTOR OF STRATEGIC GROWTH Meghan Hogan DESIGN MANAGER Christopher Wallace, Stacy Murray GRAPHIC DESIGN MANAGERS Navindra Persaud DIRECTOR OF EVENTS William Valvo UX DESIGN DIRECTOR Andrew Berman HEAD OF CUSTOMER OUTREACH AND ENGAGEMENT Tigi Kuttamperoor, Matthew Mullins MULTIMEDIA SPECIALISTS Melissa Pianin MARKETING & EVENTS ASSOCIATE Kristie Woods-Lindig ONLINE ENGAGEMENT SPECIALIST Michael Castro MARKETING MANAGER Ben Slayton FOUNDING PUBLISHER Submit your news to editorial@ambizmedia.com If you would like additional copies of Mortgage Banker Magazine Call (860) 719-1991 or email info@ambizmedia.com

www.ambizmedia.com © 2022 American Business Media LLC. All rights reserved. Mortgage Banker magazine is a trademark of American Business Media LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher. Advertising, editorial and production inquiries should be directed to: American Business Media LLC 88 Hopmeadow St. Simsbury, CT 06089 Phone: (860) 719-1991 info@ambizmedia.com

CAS H D E P LOY ME NT

Follow The Money WHERE LENDERS PUT THEIR ASSETS WILL DETERMINE HOW WELL THEY COPE WITH RAPID MARKET CHANGES.

By R O B CHR IS M A N, M ORTG AGE BAN KE R M AG A ZIN E CON TRIB U TIN G WRITER

T

he Mortgage Bankers Association estimates that last year lenders funded $1.6 trillion of purchase loans, the highest level since 2005. The demand for residential mortgages in the U.S. has skyrocketed, due to pent-up savings, interest in owning one’s own place during the COVID-19 pandemic, and low interest rates. The industry is expected to originate more than $2.5 trillion for each of the next three years, one year of the three is expected to be at least 40 percent higher than average annual originations between 2010 and 2019. And although rates may slide higher, the low interest rates have made refinancing attractive over the past two years. Volumes and margins are expected to shrink in 2022, but many lenders are sitting on profits and a portion of those will be reinvested in their companies. But where?

2020 and 2021 saw plenty of profits being spent on signing and retention bonuses.

But lenders have also been improving their marketing, processing, underwriting, funding, and servicing technology to streamline the front-to-back process of financing a home. Home loans are becoming smoother and faster. Efficiency

is increasing… certainly inefficiency is not rewarded. We can expect to see lenders spend money on further improvements at the point of origination, processing, underwriting, and loan servicing, as well as expand consumer access to homefinancing and home-buying services.

aren’t there yet. Customers like speed, but what if the sellers of the home can’t move for 30 days?

Or it is going to take two weeks for the appraiser to come out?

Mortgage customer satisfaction is now monitored by companies like The STRATMOR Group. Unfortunately, there continues to be much room ROB CHRISMAN for improvement, especially TECH TAKE compared with adjacent products Third-party technology and data providers, and other industries. Many lenders have combined with in-house IT staffs who are been able to provide a smoother mortgageaware of a particular company’s policies and application experience by digitizing the procedures, are streamlining more parts front-end platform, the digitization of the of the mortgage process. The mortgage industry remains incomplete and we can industry has been adopting technology expect lenders to spend revenue in this area. to streamline the process of a borrower Many origination and servicing processes obtaining financing, with the aim of making are still slow, manual, labor intensive, and the consumer experience better than it was fragmented, therefore ripe for disruption. ten years ago. Or six months ago.

Third-party technology and data There are limits, however, and no one providers are streamlining more parts of is expecting individual MLOs to become the mortgage process, and lenders will extinct. But borrower expectations for spend money to make sure that this is done digital engagement have risen dramatically right. Bank and nonbank lenders have in recent years. And although it would be invested in either proprietary or thirdnice to snap up a home loan in less than five party technologies across various parts minutes like we do airline reservations, we of the value chain to help with a number of processes. Initiatives include frontend platform modernization, workflow management, document extraction and management, income and asset verification, employment verification, title verification, appraisal management, e-closings, automated compliance, and decisioning.

These software solutions are designed to speed up the mortgage-application process, lower costs for the lender, and improve the overall customer experience.

ALTHOUGH IT WOULD BE NICE TO SNAP UP A HOME LOAN IN LESS THAN FIVE MINUTES LIKE WE DO AIRLINE RESERVATIONS, WE AREN’T THERE YET. 4 MORTGAGE BANKER | MARCH / APRIL 2022

WAIT TIMES

Mortgage originators still engage in laborintensive and repetitive fulfillment and servicing, even though there is potential to automate more than half of the tasks across front-to-back processes. Failure to update older processes usually results in elevated origination costs and delayed cycle times relative to competitors, and no lender wants that. Most of the technology innovation and investment in mortgage lending has been put toward the front end of the origination process. In 2022 we can expect accelerated automation efforts, including back-end elements such as straight-through processing, automated decisioning of applications, and more efficient servicing transfers. Consumers can benefit. Tech-focused lenders are helping their MLOs by “reimagining” the front-toback operating model, including streamlining document management, and driving rapid fulfillment. Processing times are reduced, and with them costs.

Many loan officers have found themselves dealing with servicing questions long after a loan funds. Although this is a good way to stay in touch with the borrower, servicing problems are a lightning rod for complaints, and therefore scrutiny by regulators like the Consumer Finance Protection Bureau… and no one wants that. Subservicers are introducing more efficient digital platforms while the market is experiencing a greater shift from in-house servicing to outsourcing, propelled by higher regulatory scrutiny and the challenge of default servicing (which can cost five times as much as servicing a performing loan and requires niche expertise).

Moreover, the capital-intensive nature of the servicing business often acts as a deterrent, and therefore technology that drives down servicing costs will be where money is spent. Modernization and digitization are two things driving servicing departments. The use of technology and behavioral science to increase efficiency,

improve the borrower experience, boost retention, and strengthen compliance will be emphasized, and those things come with a price tag, as does building a digital interface that helps mortgage borrowers access information about their loans, make payments accurately, upload or receive documentation, and communicate seamlessly.

Lenders (and vendors) have had a good few years from a profitability perspective.

Despite the belt tightening that is expected throughout 2022, money will be spent on technology initiatives that will help lenders in the long run. We’ve already seen a digital acceleration in the mortgage industry, much of it directed at long-term cost savings and providing a superior customer experience.

The reasons are compelling: offer a more efficient, consumer-friendly mortgage process that is less expensive or watch potential borrowers go elsewhere.

MORTGAGE BANKER | MARCH / APRIL 2022 5

6 MORTGAGE BANKER | MARCH / APRIL 2022

A

Foreclosure Activity Sets Post Pandemic Highs

TTOM Data Solutions released its Q1 2022 U.S. Foreclosure Market Report, which shows a total of 78,271 U.S. properties with a foreclosure filing during the first quarter of 2022, up 39 percent from the previous quarter and up 132 percent from a year ago.

The report also shows a total of 33,333 U.S. properties with foreclosure filings in March 2022, up 29 percent from the previous month and up 181 percent from a year ago — the 11th consecutive month with a year-over-year increase in U.S. foreclosure activity.

“Foreclosure activity has continued to gradually return to normal levels since the expiration of the government’s moratorium, and the CFPB’s enhanced mortgage servicing guidelines,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “But even with the large year-overyear increase in foreclosure starts and bank

repossessions, foreclosure activity is still only running at about 57% of where it was in Q1 2020, the last quarter before the government enacted consumer protection programs due to the pandemic.”

INCREASE IN ALL 50 STATES

A total of 50,759 U.S. properties started the foreclosure process in Q1 2022, up 67 percent from the previous quarter and up 188 percent from a year ago.

States that had the greatest number of foreclosures starts in Q1 2022 included, California (5,378 foreclosure starts), Florida (4.707 foreclosure starts), Texas (4,649 foreclosure starts), Illinois (3,534 foreclosure starts), and Ohio (3,136 foreclosure starts).

U.S. Foreclosure Starts Those major metros that had the greatest number of foreclosures starts in Q1 2022 included, Chicago, Illinois (3,101 foreclosure starts), New York, New York (2,580

foreclosure starts), Los Angeles, California (1,554 foreclosure starts), Houston, Texas (1,431 foreclosure starts), and Philadelphia, Pennsylvania (1,375 foreclosure starts).

Nationwide one in every 1,795 housing units had a foreclosure filing in Q1 2022.

States with the highest foreclosure rates were Illinois (one in every 791 housing units with a foreclosure filing); New Jersey (one in every 792 housing units); Ohio (one in every 991 housing units); South Carolina (one in every 1,081 housing units); and Nevada (one in every 1,090 housing units).

Among 223 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in Q1 2022 were Cleveland, Ohio (one in every 535 housing units); Atlantic City, New Jersey (one in 600); Jacksonville, North Carolina (one in 633); Rockford, Illinois (one in 634); and Columbia, South Carolina (one in 672)

MORTGAGE BANKER | OCTOBER 2021 7

MortgageBanker MAGAZINE

NATIONAL PAYMENT-TO-INCOME RATIO* Payment To IncomeRatio (Left Axis)

40%

Freddie 30-Year Fixed Interest Rate (Right Axis)

34.1%

35%

8%

27.5% 7%

23.3%

25%

Freddie 30-Year Fixed Rate

Payment to Income Ratio

30%

20% 5% 15%

3.9% 10%

4%

2022-02

2021-02

2020-02

2019-02

2018-02

2017-02

2016-02

2015-02

2014-02

2013-02

2012-02

2011-02

2010-02

2009-02

2008-02

2007-02

2006-02

2005-02

2004-02

2003-02

2002-02

2001-02

2000-02

1999-02

1998-02

1997-02

0%

1996-02

5% 2%

Source: Black Knight Home Price Index, FHLMC PMMS, Census Bureau *The National Payment-to-Income Ratio is the share of median income needed to make the monthly principal and interest payment on the purchase of the average-priced home using a 20% down 30-year fixed rate mortgage at the prevailing interest rate

JANUARY 2022 FORECLOSURE STARTS (PERCENT CHANGE FROM JANUARY 2020) -12%

-42%

-17%

+11%

+19% +32%

-56%

-39%

-30%

+5%

-41%

0% +20%

-12%

+1%

-26%

-33% -17%

-56% -91% -13% -28%

-23%

-8%

-5%

-18% -21%

LOANS ROLLING TO A MORE DELINQUENT STATUS

NATIONAL DELINQUENCY RATE – FIRST LIEN MORTGAGES 2000-2005 Average

-52%

-25%

-35%

GREEN = ABOVE 2020 LEVELS BLUE = BELOW 2020 LEVELS

Delinquency Rate

-81%

+6% -20% +2%

-42% +20%

-28%

-5%

+5%

0% -48%

-36%

-12%

Current to 30 Days Delinquent

Record Low

11.00%

30 to 60 Days Delinquent

60 to 90 Days Delinquent

2,000,000

10.00% 9.00%

1,500,000

8.00% 7.00%

1,000,000

6.00% 5.00%

4.77%

500,000

4.00%

Source: Black Knight, McDash

8 MORTGAGE BANKER | MARCH / APRIL 2022

Source: Black Knight, McDash

2022-01

2021-12

2021-11

2021-10

2021-09

2021-08

2021-07

2021-06

2021-05

2021-04

2021-03

2021-02

2021-01

2020-12

2020-11

2020-10

2020-09

2020-08

2020-07

2020-06

2020-05

2020-04

2020-03

2020-02

2020-01

2019-12

2019-11

2019-10

2019-09

2019-08

2019-07

2019-06

2019-05

2019-04

2019-03

2001-01 2001-07 2002-01 2002-07 2003-01 2003-07 2004-01 2004-07 2005-01 2005-07 2006-01 2006-07 2007-01 2007-07 2008-01 2008-07 2009-01 2009-07 2010-01 2010-07 2011-01 2011-07 2012-01 2012-07 2013-01 2013-07 2014-01 2014-07 2015-01 2015-07 2016-01 2016-07 2017-01 2017-07 2018-01 2018-07 2019-01 2019-07 2020-01 2020-07 2021-01 2021-07 2022-01

2.00%

2019-02

3.00%

2019-01

3.30%

Source: Black Knight, McDash -5% -1.0%

Source: Black Knight Home Price Index

6.6%

4.3% 5.6%

3.8%

2.0% 2.7% 7.5%

6.1%

6.8%

4.0%

4,000,000

2,000,000

1,500,000

1,000,000

6.5%

4.4% 5.1%

DARK BLUE INDICATES A HIGHER SHARE OF SDQS BEING REFERRED TO FORECLOSURE

4,500,000

MORTGAGE DELINQUENCIES BY SEVERITY

Total Delinquent

3,500,000

80%

3,000,000

70%

2,500,000

60%

500,000

10%

0

0%

4.0% 3.6%

5.3% 5.2% 6.1%

4.1%

All Other Serious Delinquencies

5.0%

5.1%

5.8% 1.0%

In Active Loss Mitigation

5.1%

In Forbearance

2022-01

2021-10

2021-07

2021-04

2021-01

2020-10

2020-07

2020-04

2020-01

2019-10

2019-07

2019-04

2019-01

2018-10

2018-07

2018-04

2018-01

Single Family

2017-10

2017-07

2017-04

2017-01

2016-10

2016-07

4.0%

2016-04

2016-01

2015-10

2015-07

2015-04

2015-01

2014-10

0.0%

2014-07

0%

2014-04

BLACK KNIGHT HOME PRICE INDEX

2014-01

0.5%

2013-10

1.0%

2013-07

1.5%

2013-04

+5%

2013-01

2.0%

2012-10

+10%

1/ 20 2 2/ 0 20 6 /2 2 0 /2 6 /2 0 20 3/ 2 7 /1 02 4/ 0 20 8 /4 2 0 /2 8 /2 0 20 5/ 2 9 /1 02 5/ 0 2 1 0 02 /6 0 / 1 0 2 02 /2 7/ 0 1 1 20 /1 20 7/ 2 1 2 0 20 /8 / 1 2 2 02 /2 9/ 0 2 1 /1 0 20 9/ 20 2 /9 2 1 /2 0 3 /2 21 /2 3 /2 0 21 3/ 20 4 /1 2 3/ 1 20 5 /4 2 1 /2 5 /2 0 21 5/ 2 6 /1 02 5/ 1 20 7 /6 2 1 /2 7 /2 0 21 7/ 2 8 /1 02 7/ 1 20 9 /7 2 1 /2 9 /2 0 21 8/ 1 0 2 02 /1 9/ 1 2 1 1 0 21 /9 / 1 1 2 02 /3 0 1 1 2 /20 /2 21 1/ 2 1 /1 0 21 1/ 20 2 /1 2 2 /2 02 2

2.5%

5 /1

3.0% 1-Month % Change in Average Home Price

3.5%

4 /2

+15%

2022-01

Annual Home Price Growth Rate

2021-12

+20%

2021-11

7.8%

2021-10

2021-09

2021-08

2021-07

90+ Days Delinquent

2021-06

2.8%

2021-05

5.0%

2021-04

3.9%

2021-03

2021-02

2.8%

2021-01

60 Days Delinquent

2020-12

1.9%

2020-11

Annual Home Price Growth Rate

1-Month Home Price Change

2020-10

2020-09

2.1%

2020-08

2020-07

2020-06

2020-05

30 Days Delinquent

2020-04

2020-03

2020-02

2020-01

2019-12

2019-11

2019-10

2019-09

2019-08

2019-07

2012-01 2012-04 2012-07 2012-10 2013-01 2013-04 2013-07 2013-10 2014-01 2014-04 2014-07 2014-10 2015-01 2015-04 2015-07 2015-10 2016-01 2016-04 2016-07 2016-10 2017-01 2017-04 2017-07 2017-10 2018-01 2018-04 2018-07 2018-10 2019-01 2019-04 2019-07 2019-10 2020-01 2020-04 2020-07 2020-10 2021-01 2021-04 2021-07 2021-10 2022-01

DATABANK

YEAR-OVER-YEAR CHANGE IN MEDIAN SALES PRICE

30%

(COLLATERAL ANALYTICS) Condominium

25%

20%

15%

10%

5%

-0.5% -5%

0%

Source: Collateral Analytics

JANUARY 2022 FORECLOSURE STARTS

(AS % OF SERIOUSLY DELINQUENT MORTGAGES) 4.3%

4.2%

3.6%

2.8%

2.4% 0.3% 4.3%

4.5% 3.6%

3.6% 4.2%

3.8%

100%

DISTRIBUTION OF SERIOUS DELINQUENCIES (90+ DAYS)

In Bankruptcy

90%

50%

40%

30%

20%

Source: Black Knight, Un-Extrapolated Data Observations from McDash Flash Dataset

MORTGAGE BANKER | MARCH / APRIL 2022 9

R I S I NG R AT E S

Originators Are Having a Different Discussion WITH RATES RISING, THE SALES CONVERSATION HAS TO BECOME BROADER

L

By RO B CHR IS M AN, M ORTG AGE BAN KE R M AG A ZIN E CON TRIB U TIN G WRITER

oan officers have the ability to sell a combination of product, price, and service. 2021 wrapped up a great two years of volumes, profits, and incomes, but the focus has turned to 2022 and what the year might hold. The start of the year came with discouraging news for anyone hoping that lower rates would continue.

The pent-up demand by consumers for restaurant meals, travel, automobiles, and all types of consumer goods has jumped out of the gate. With it came talk of an expanding economy. And inflation.

The Federal Reserve Bank of the United States (aka, the Fed) has a few missions, one of which is the stability of our economy.

When the economy begins to expand too fast, inflation and asset bubbles can get out of hand, threatening this stability. That’s

10 MORTGAGE BANKER | MARCH / APRIL 2022

when the Fed will step in and banks (think Wells Fargo, Chase, US Bank, Bank of America, and raises interest rates, which helps so on) charge each other for cool down the economy and overnight loans. keep growth on a more orderly When the Federal Reserve path. raises the federal funds target At the end of January and rate, it increases the cost of early February, the Fed made credit throughout the economy. it clear that multiple rate Readers of Mortgage Banker increases were in the cards for ROB CHRISMAN Magazine know that higher 2022. Originators should know interest rates in general make that when the Fed discusses loans more expensive for both businesses raising interest rates, it is referring to the and consumers, and everyone ends up federal funds rate, also called the federal spending more on interest payments and funds target rate. Through its actions, it sets less on other items. Companies that were a target rather than the actual rate, but its going to borrow money to expand may goals are evident. At its regular meetings, shelve projects if the costs are too high. the Federal Open Market Committee Higher rates encourage people to save (FOMC) sets a target range for the federal money to earn higher interest on their bank funds rate, which acts as a reference for the interest rates big depository commercial CONTINUED ON PAGE 16

MORTGAGE BANKER | MARCH / APRIL 2022 11

Now on tour!

Join your fellow hard-working mortgage pros at one of our national Mortgage Expos.

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ive your career a boost by attending one of our many regional mortgage events for loan origination professionals. Network with hundreds of mortgage brokers, loan originators and bank and credit union lending officers from throughout your region for events full of education, networking and fun. These events includes a broad array of event partners from throughout the mortgage community, multiple education sessions and top speakers. You’ll be growing your business and your contacts in a setting packed with passion, professionalism and fun.

Plus, earn your NMLS continuing education credits at FREE classes, happening the next day and open to all conference attendees.

O R I G I NATOR CO N N ECT N E TWO RK .CO M

Attend for free,* use code:

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Complimentary registration available to NMLS-licensed active LOs and their support staff.

Show producers reserve the right to determine final eligibility. NMLS Renewal class open to expo attendees only, other restrictions apply.

12 MORTGAGE BANKER | MARCH / APRIL 2022

UPCOMING EVENTS

MAY

5

MAY

11

MAY

24 JUN

8

California Mortgage Expo IRVIN E , CA N MLS R EN EWA L CL A S S

Utah Mortgage Show PARK C ITY, UT N MLS R EN EWA L CL A S S

Suncoast Mortgage Expo TA M PA , F L N MLS R EN EWA L CL A S S

Motor City Mortgage Expo D E T RO IT, M I N MLS R EN EWA L CL A S S

AUG

19

AUG

19 SEP

1

SEP

8

Originator Connect L A S VEG A S , NV NM LS R E NEWA L C L A S S

Non-QM Summit L A S VEG A S , NV NM LS R E NEWA L C L A S S

Texas Mortgage Roundup DA LL A S , TX NM LS R E NEWA L C L A S S

Great Northwest Mortgage Expo SE AT TLE , WA NM LS R E NEWA L C L A S S

JUST ADDED

JUN

16 JUN

23 JUL

6

JUL

7

JUL

21 AUG

11

Texas Mortgage Roundup S A N A N TO N IO, TX N MLS R EN EWA L CL A S S

Great Northwest Mortgage Expo P O RT L AN D, O R N MLS R EN EWA L CL A S S

Mortgage Star N EW O RL E A N S , L A N MLS R EN EWA L CL A S S

Ultimate Mortgage Expo N EW O RL E A N S , L A N MLS R EN EWA L CL A S S

Arizona Mortgage Expo PH O E N IX , AZ N MLS R EN EWA L CL A S S

SEP

13 OCT

11

OCT

18 NOV

8

DEC

13

California Mortgage Expo PA SA DE NA , CA NM LS R E NEWA L C L A S S

California Mortgage Expo OA K L A ND, CA NM LS R E NEWA L C L A S S

Colorado Mortgage Summit DE NVE R, CO NM LS R E NEWA L C L A S S

Texas Mortgage Roundup HO USTO N, TX NM LS R E NEWA L C L A S S

OCN Mortgage Holiday Party I RVI NE , CA

California Mortgage Expo S A N D IEG O, CA N MLS R EN EWA L CL A S S

MORTGAGE BANKER | MARCH / APRIL 2022 13

CFPB: Forbearance Programs Worked

T

he COVID-19 pandemic created a dire situation for many homeowners, and almost 8 million homeowners have taken advantage of mortgage forbearance programs over the course of the pandemic. Forbearance programs, such as those provided under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020, allowed many borrowers to take forbearances for reasons related to the COVID-19 pandemic for periods lasting up to 18 months.

A significant number of homeowners have transitioned out of those forbearances over the last year due, in part, to improving economic conditions and the expiration of protections under these programs for many loans beginning in the Fall of 2021. Given these changes, the Consumer Financial Protection Bureau said its goal is to better understand the characteristics of borrowers who remain in forbearance.

In a May 2021 Consumer Financial Protection Bureau(CFPB) report, it used data from the National Mortgage Database (NMDB®) to report on the characteristics of mortgage borrowers during the COVID-19 pandemic based on the account status of borrowers reported through March 2021. The focus of its latest report is to understand the mortgage characteristics and demographics of borrowers who remained in forbearance in January 2022.

As in the May report, its sample of borrowers comes from the NMDB, which is a random 1-in-20 sample of closed-end first-lien mortgages in the United States. The CFPB analyzed borrower demographic and loan characteristics for a sample of more than 2 million mortgage loans for owner-occupied properties.

The data include borrower-level demographics and loan-level origination and performance information. The account status in the NMDB is based off credit record data. The CFPB measured account status for open loans as reported through January 2022.

Overall, its January 2022 sample of borrowers had a forbearance rate of 1.3 percent,

14 MORTGAGE BANKER | MARCH / APRIL 2022

compared to 4.7 percent in the March 2021 sample used in its May 2021 report.

THE PRIMARY FINDINGS INCLUDE:

• The share of mortgages in forbearance fell significantly for minority and nonminority borrowers between March 2021 and January 2022. Decreases in the rate of forbearance were relatively larger for non-white than for white borrowers with the largest decreases occurring among Hispanic and other race borrowers.

• Black and Hispanic borrowers were overrepresented among those in forbearance. Black and Hispanic borrowers accounted for a combined 31.2 percent of forbearances, while only accounting for 18. percent of the overall sample of borrowers. Furthermore, Black borrowers were 2.8times more likely and Hispanic borrowers were 1.6 times more likely to be in forbearance compared to white borrowers.

• Borrowers in forbearance as of January 2022 appear to have less financial capacity, on average, than borrowers in forbearance as of March 2021. Among mortgage borrowers who were pre-COVID delinquent, the rate of forbearance fell 46 percent between March 2021 and January 2022, whereas the rate of forbearance

fell 74 percent over the same period for borrowers who were pre-COVID current.

• Mortgage borrowers who were preCOVID delinquent were relatively less likely to be in forbearance compared to borrowers that were pre-COVID current in January 2022.

• COVID current borrowers were 12.4 times more likely to be in forbearance than to be 60+ days delinquent. In comparison, pre-COVID delinquent borrowers were only 2.7 times as likely to be in forbearance than to be 60+ days delinquent.

• Mortgage borrowers with current (or mark-to-market) loan-to-value (LTV) ratios over 95 percent had significantly higher rates of forbearance compared to loans with lower LTV ratios in January 2022. However, this population of borrowers accounted for a small share of forbearances (1.0 percent).

• Finally, in the January 2022 sample there was a significantly smaller share of loans with current LTV ratios above 80 relative to the March 2021 sample of borrowers.

Unlike in past recessions where house prices fell, the pandemic economy has seen significant house price appreciation that can reduce a borrower’s LTV ratio, all else equal.

L EG AL

MORTGAGE BANKING LAWYERS These attorneys are universally recognized by their peers as setting the highest standard for the legal profession, excelling in all fields — knowledge, analytical ability, judgment, communication, and ethics.

Scott L. Luna Partner sluna@ravdocs.com 469-730-4607 Scott Luna’s practice is focused on real estate law with an emphasis on mortgage document preparation and land title issues. Scott managed a successful multistate highvolume title and document preparation business for over 20 years before joining RAV and is recognized throughout the real estate legal community for his expertise. As a past President of the Oklahoma Land Title Association, Scott’s ongoing involvement in the industry adds to his wealth of title-related knowledge. Scott received his Juris Doctor degree from the University of Tulsa College of Law in 1991 after receiving his Bachelor of Science degree from Texas A&M University.

Scott is currently licensed in Texas, Oklahoma, Missouri, Minnesota, Nebraska, and Kentucky.

Mitchel H. Kider Managing Partner

Gregory S. Graham

kider@thewbkfirm.com 202-557-3511

ggraham@bmandg.com 972-353-4174

In his 35 years as a practicing attorney, Mitch has represented banks, mortgage companies, residential homebuilders, real estate settlement service providers, credit card issuers, and other financial service companies in a broad range of matters. Mitch represents clients in investigations and enforcement actions before the Consumer Financial Protection Bureau, Department of Housing and Urban Development, Department of Veterans Affairs, Department of Justice, Federal Trade Commission, Ginnie Mae, Fannie Mae, Freddie Mac, and various state and local regulatory authorities and Attorneys General offices.

In addition, Mitch acts as outside general counsel to smaller companies and special regulatory and litigation counsel to Fortune 500 companies.

Black, Mann & Graham CoManaging Partner Gregory S. Graham has practiced in the areas of real estate, litigation, and bankruptcy law since 1989, and is currently licensed in Texas and admitted to practice before the United States District Courts for the Northern and Eastern Districts of Texas.

Mr. Graham is also currently licensed to practice law in Georgia and has been since 2017. He received his Juris Doctor degree from Southern Methodist University School of Law in 1989 after receiving a Bachelor of Arts cum laude from UT Dallas.

Co-Managing Partner

Mr. Graham’s affiliations include the Dallas MBA, where he previously served as a Director & Chairperson of the Legislative Committee; DFW Mortgage Brokers Association, where he previously served as Legal Counsel; MBA; NAMB; Texas AMB prior to its closure; and Texas MBA.

James W. Brody, Esq. Mortgage Banking Practice Group Chair

jbrody@johnstonthomas.com 415-246-3995 James Brody actively manages all the complex mortgage banking litigation, mitigation, and compliance matters for Johnston Thomas. Mr. Brody’s experience centers on those legal issues that arise during loan originations, loan purchase sales, loan securitizations, foreclosures, bankruptcy, and repurchase & indemnification claims. He received his B.A. in International Relations from Drake University and received his J.D., with a certified concentration in Advocacy, from the University of the Pacific, McGeorge School of Law. He was a recipient of the American Jurisprudence BancroftWhitney Award. He is licensed to practice law in California and has been admitted to practice in front of the United States District Courts for the Central, Eastern, Northern, and Southern Districts of California.

In addition, Mr. Brody has served as lead litigation counsel for numerous mortgage banking and commercial related disputes venued in both state and federal courts, in a direct capacity or on a pro hac vice basis, in AZ, CA, FL, MD, MI, MN, MO, OR, NJ, NY, PA, TN, and TX.

Marty Green Attorney marty.green@ mortgagelaw.com 214-691-4488 ext 203 Marty Green leads the Dallas office of Polunsky Beitel Green, one of the country's top residential mortgage law firms.

Mr. Green is an accomplished attorney with more than 20 years of experience in the legal, banking and financial services industries. He is the former Executive Vice President and General Counsel for Dallas’ CTX Mortgage Co. and previously worked with the Baker Botts law firm in Dallas as Special Counsel. In his role as leader of the firm’s Dallas office, Mr. Green advises clients on the latest rules and regulations covering residential lending, in addition to building on Polunsky Beitel Green’s long tradition of delivering loan closing documents with speed and accuracy. Mr. Green is admitted to practice before all Texas state and federal district courts in addition to the U.S. Court of Appeals for the Fifth Circuit. An honors graduate of the University of Texas School of Law, he earned his undergraduate degree at Southern Utah University.

Texas Monthly has selected him as a Super Lawyer multiple years.

MORTGAGE BANKER | MARCH / APRIL 2022 15

RISING RATES CONTINUED FROM PAGE 10

MLOS ARE HAVING A DIFFERENT DISCUSSION WITH BORROWERS THAN SIX MONTHS AGO. accounts. This reduces the supply of money in circulation, which tends to lower inflation and moderate economic activity. In other words, if your client is saving money in the bank, they’re not spending it on a car.

GUARANTEED RATE HIKES

Experienced mortgage loan originators are adept at selling payment, lifestyle, and products rather than rate. But rate is still a discussion topic… It always has been and always will be. If the Federal Reserve, over the next several months, continues to raise the targeted Fed Funds rate, how will that impact mortgage rates and your client’s costs?

A $300,000 30-year, fixed-rate mortgage at 3.5 percent costs roughly $185,000 in interest over the 30 years. Monthly payments of principal and interest are about $1,340. There isn’t a 1:1 correlation between overnight Fed Funds and 30-year mortgage rates. Average interest rates have already exceeded the 5 percent mark in some areas.

Let’s be conservative and look at the situation when average rates are just 4.50 percent. The interest costs go to $247,000 over those 30

16 MORTGAGE BANKER | MARCH / APRIL 2022

years on a monthly payment of $1,520, or a difference of $62,000. That averages out to $172 per month.

MLOs are having a different discussion with borrowers than six months ago.

Borrowers are being encouraged to make a larger down payment using savings from the last few years, therefore lowering the amount borrowed and therefor the monthly payment. Down payment assistance programs are all the rage. Borrowers and originators are walking through their credit reports to improve their credit score. Lenders will usually provide lower rates to borrowers with better scores. “Buying down” the rate is an option for some borrowers. Paying discount points will lower the interest rate for the life of the loan. MLOs know that if your client is going to be in the home for a long period of time, paying points makes sense.

A mortgage is one of the few financial transactions where a borrower can lock in a future price now. In a rising rate environment, this is being encouraged. Instead of a 30-year mortgage, 20-year, 15-year, and adjustablerate mortgages are back on the table. This is

where a trained loan officer working for a reputable lender will take the time to work through various options with borrowers and add value.

MLOs will remind their client of the tax advantages of paying money in interest instead of rent, which creates wealth. Or, perhaps put the person into a 15-year mortgage, or an adjustable-rate mortgage, with a lower interest rate. Perhaps the client will buy a smaller home. It is not as easy a discussion to have as has been the case over the last few years, but MLOs need to be prepared for it.

No one predicted the impact that the pandemic would have on interest rates, property values, the shift in the workforce, or what our economy would look like coming out of it. Once again, however, trained and compliant loan officers are adding value every day through educating and coaching their clients. MLOs using the right technology are “stepping up their game” and showing borrowers that it is an advantage in dealing with a human rather than obtaining financing over the internet.

Join us in the Big Easy!

The mortgage industry is going through a significant change. For mortgage origination professionals, it's a struggle to keep on top of all the changes, and to keep your sales strategies and marketing initiatives at their peak. You need to keep your pipeline filled, and you need the tools and directions to stay profitable, efficient, and effective. We've brought together the best in the business to create a top tier event, the Ultimate Mortgage Expo, specifically designed for mortgage origination pros.

Thursday, July 7, 2022

New Orleans, LA

+ Free NMLS Renewal Class July 8

www.ultimatemortgageexpo.com Enjoy free registration using our code OCNFREE .

PRESENTING SPONSOR

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SHOW PRODUCER

MORTGAGE BANKER | MARCH / APRIL 2022 17 Complimentary registration available to NMLS-licensed active LOs and their support staff. Show producers resereve the right to determine final eligibility.

In 2021, we had a record turnout for our best event... yet.

Let's just say, you won't want to miss this year's Originator Connect and these exclusive programs:

Free NMLS Renewal* Build-A-Broker Non-QM Summit Private Lender Forum & so much more!

See the full lineup of events and reserve your spot for free using our code MBFREE at www.originatorconnect.com.

AUGUST 19 - 21, 2022

LAS VEGAS, NV

Join us at Planet Hollywood, located at the heart of the Las Vegas Strip!

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18 MORTGAGE BANKER | MARCH / APRIL 2022

Safety is our top priority. Learn about the safety precautions we take at each of our events to earn us 100% safety satisfaction from our attendees at originatorconnectnetwork.com/covid19. *Complimentary registration available to NMLS-licensed active LOs and their support staff. Show producers resereve the right to determine final eligibility.