NOVEMBER 2021
In This Issue Partner Updates In Case You Missed It: FHFA Eliminated the Adverse Market Fee for Refinances How Close Attention to the Initial Escrow Statement Can Prevent Surprise Payment Changes for Borrowers Administration Outlines Plan to Improve Home Affordability Is Now a Good Time for FIs to Focus on Home Equity Lending? Our Lending Conference Will Return in 2022! The Buzz: Recent Feedback
PARTNER UPDATES
We are looking forward to supporting the institutions who became part of the Servion Mortgage family in September and October! New Retail Lending Partners Bank of Billings Billings, MO
Credit Union of Colorado Denver, CO
First Security Bank Canby, MN
Fond du Lac Credit Union Fond du Lac, WI
Greater Valley Credit Union Fresno, CA
Teachers Credit Union Oklahoma City, OK
LEARN ABOUT OUR PRODUCTS & PARTNERSHIP OPPORTUNITIES
In You YOU MissedMISSED It: FHFA IT: INCase CASE Eliminated the Adverse Market FHFA ELIMINATED THE ADVERSE MARKET FEE FOR REFINANCES Fee for Refinances The Federal Housing Administration (FHFA) has eliminated Fannie Mae and Freddie Mac’s controversial adverse market refinance fee. Instituted in December of 2020, the 50-basis-point adverse market refinance fee was imposed on lenders when refinancing mortgages over $125,000. The fee was heavily criticized because while the fee was charged to lenders, the cost was typically passed along to consumers in the form of higher closing costs or interest rates.
WHAT DID FHFA SAY WHEN ENDING THE FEE? FHFA ended the adverse market fee on August 1, 2021, just eight months after it began. In its announcement, FHFA said, “The fee was designed to cover losses projected as a result of the COVID-19 pandemic. The success of FHFA and Fannie Mae and Freddie Mac COVID-19 policies reduced the impact of the pandemic and were effective enough to warrant an early conclusion of the Adverse Market Refinance Fee.” The agency further noted that its “expectation is that those lenders who were charging borrowers the fee will pass the cost savings back to borrowers.”
Sources https://www.stessa.com/blog/fhfa-eliminates-the-adverse-market-refinance-fee https://www.consumerfinancemonitor.com/2021/07/16/fhfa-eliminates-adverse-market-refinance-fee
REACTION TO THE FEE’S ELIMINATION Diana Olick of CNBC, who regularly covers all things mortgage, noted the industry was supportive of the fee’s elimination. She interviewed Greg McBridge, chief financial analyst for Bankrate.com, who said “The fee had often resulted in an increase of one-eighth of a point in rate, which was enough to siphon $20 per month in potential savings out of the pockets of borrowers with a $300,000 loan.” Housing Wire also reported that many were happy to see the fee disappear given how well lenders have performed during the pandemic. And, both Fannie Mae and Freddie Mac did extremely well, with Fannie reporting $5 billion in net income during Q1 2021 and Freddie reporting $2.8 billion in earnings. Clearly with lending at record levels throughout COVID, the main rationale for the fee – namely that it would cover COVID-related losses – disappeared, as has the rate itself.
Trusted Realtors® to Help Retain Preapprovals Losing touch with preapproved borrowers means losing out on valuable business. But with everything else you’re doing, how can you find the time to stay in contact with them?
Let Servion Realty help!
Our local agents can follow up with your preapproved borrowers.
We never steer your preapproved borrowers to any other lender.
Talk to your account executive about partnering with Servion Realty and watch your mortgage business grow!
You can focus on more immediate client needs without losing preapproved borrowers.
How Close Attention to the Initial Escrow Statement Can Prevent Surprise Payment Changes for Borrowers An escrow analysis is one of the most difficult things to explain to borrowers, mostly because taxes and insurance fluctuate throughout the life of the loan. Because of this fluctuation, it is very important that the first escrow calculations are correct from the very beginning. If there are errors, it’s the borrower who faces an unwanted surprise later on when their payment amount changes. The initial escrow statement, or IES, may not be as “glamorous” as the note and the mortgage, but it is still an extremely important document. The IES is intended to calculate the escrow payment and ensure there are no surprise payment changes for the borrower during the first year of their loan. If not completed correctly, the borrower’s payments could increase, possibly before they even make their first payment. That obviously leads to dissatisfaction, a result we all want to avoid. Here are four critical items to review when completing the initial escrow statement to help avoid a surprise payment change in the first year of the loan.
ESCROW PROJECTION The projection must include all escrow items. If an item was paid at closing, confirm the escrow payment includes 1/12 of that item.
NEGATIVE BALANCE If there is a negative balance anywhere in your projection, the IES is incorrect. CUSHION AMOUNT The cushion amount must be established at the lowest point of your projection balance. The cushion amount cannot include PMI / MIP. TAX AND INSURANCE AMOUNTS AND FREQUENCY Verify the amounts for taxes and insurance as well as their frequency. Timing of disbursements affects the low point of the projection. Overall, the initial escrow statement is one of those things that tends to be taken for granted, but it can cause unnecessary borrower dissatisfaction when not completed properly. Taking a few extra minutes to check and double check the IES information can save everyone a headache down the road.
Have a question for our mortgage servicing department? Send an email to knystrom@myservion.com and your question might be answered in a future newsletter!
Administration Outlines Plan to Improve Home Affordability Many would-be homebuyers have been priced out of the market over the past year as record low interest rates and inventory shortages have driven prices sky-high. The CoreLogic Case-Shiller 20-city home price index published on Sept. 28 showed prices rose a record 19.95 percent in July compared to a year earlier. Researchers at Freddie Mac estimate that the supply of homes in the U.S. is about 3.8 million units short of what is needed to meet demand. The shortage has been so severe for so long that housing prices are steadily rising faster than incomes, which makes it much harder for people to save for down payments.
The White House Council of Economic Advisors recently published an analysis of the affordability problem and outlined the Biden administration’s plans to tackle it. Specifically, the plan is aimed at creating an additional 100,000 affordable homes over the next three years. To accomplish this, the administration plans to: Increase the supply of manufactured homes and 2-4 unit properties by increasing mortgage availability through Fannie Mae and Freddie Mac. Raise Fannie and Freddie’s equity cap for low-income housing tax credits to $850 million. Make it easier for would-be buyers and nonprofits to buy houses that failed to sell at foreclosure auctions. Work with state and local governments to boost housing supply by leveraging existing federal funds. Put limits on large investors’ ability to purchase certain FHA-insured and HUD-owned properties. While this plan is designed to create 100,000 affordable homes, the administration also estimates that its overall economic agenda would lead to the construction and renovation of 2 million additional homes. This would be accomplished through the low-income housing tax credit, a proposed new tax credit for construction in economically vulnerable neighborhoods, and incentivizing local governments to remove exclusionary zoning policies that limit housing construction. Acknowledging that there are no quick fixes to the affordability situation, the Council’s announcement concluded by saying, “There is no magic formula to quickly relieve the supply constraints.”
The Mortgage Bankers Association issued a statement supporting the plan: “MBA strongly supports efforts to increase the housing supply by encouraging the construction and rehabilitation of affordable apartments and homes for renters and first-time buyers.” Source: https://www.usnews.com/news/business/articles/2021-09-01/white-house-details-plans-to-improve-housing-affordability
Is Now a Good Time for FIs to Focus on Home Equity Lending? While Servion Mortgage doesn’t offer home equity loans, part of our commitment to partners is keeping you informed. And right now, we think it’s a good time to inform you that there could be an opportunity for community FIs to have success with home equity loans, also known as HELOCs. If short- and long-term interest rates rise – and they have slowly crept up so far this fall – home equity loan rates could become attractive when compared to mortgage refinancing. As such, homeowners might be more inclined to do a HELOC than a refinance. So if you have a strategy for HELOCs, you could benefit. Here are a few HELOCrelated points of interest to consider:
Many large banks reportedly reduced or even stopped home equity lending during the pandemic. If interest rates rise and you are prepared with a HELOC solution, homeowners could be looking your way. Homeowners have record amounts of equity to use. Home prices have skyrocketed and as a result, homeowners collectively gained $1.9 trillion in equity from 2020 to 2021. Many are looking for ways to use that equity for remodeling rather than trying to buy a different house at elevated prices. Working from home means renovations. If working from home sticks around, more people might want to use home equity to create a more permanent office that is more comfortable to work from for many years. Overall, offering HELOCs could help your credit union or community bank gain more business over the coming year, particularly if short- and long-term rates rise. Servion Title Offers Home Equity Title Services. While Servion Mortgage does not offer home equity loans, our sister company, Servion Title, does offer home equity title solutions including recording, O&E reports, and more. You can order home equity title through Servion in all 50 states. See the home equity page of our website for more information.
MILITARY DISCOUNT Servion Title salutes our troops with an exclusive discount as a thank you for their service and dedication! We welcome all Active Duty members, Reserves, Veterans and Retirees including their immediate family members.
LENDING CONFERENCE
OUR
WILL RETURN IN 2022! We are thrilled to announce that we are planning to host our lending conference again in the fall of 2022! We hosted a lending conference each year beginning in 2017, and it had grown into a multi-day event covering mortgage and business lending. Leaders and staff from our partner credit unions and community banks would come together to learn and explore ideas for growth. Of course, the pandemic forced us to cancel in 2020 and, with uncertainty over the delta variant, we called it off again in 2021. Now, we’re getting the event back underway! We’ll have more details in the coming months, but here’s what you should know for now.
SEPTEMBER 26 AND 27
Mortgage Sessions
SEPTEMBER 28
Business/Commercial Lending Sessions
THE ST. PAUL HOTEL
350 Market Street • St. Paul, Minnesota *The location is very likely (but not 100% certain yet) to be The St. Paul Hotel, which is the same venue as our 2019 conference.
So, whether you’ve attended the conference before or this would be your first time, we are very excited to see all of you next September!
It was such a pleasure working with the team, the whole process felt way too easy!
You have been AMAZING on each and every loan I have ever done through you. Thanks again for everything!
THE
BUZZ
Hear what our partners are saying about us!
I cannot sing praises enough for the outstanding work that you all provide to help make our mortgage department flourish.
I love working with all of you at Servion! You make my life so easy!
SERVICE. SOLUTIONS. SUCCESS. 651-631-3111 • myservion.com Servion Mortgage is a DBA of Servion, Inc. NMLS #1037. Equal Housing Lender.