Homebuyers are increasingly opting for nontraditional mortgages – Opens a New Window.which helped precipitate the housing crisis about one decade ago – potentially foreshadowing trouble as high prices continue to weigh on housing affordability.

Throughout the first three quarters of last year, unconventional mortgages – those that don’t require borrowers to show typical income or other asset verifying documentation – rose 24 percent to $34 billion, according to data from Inside Mortgage Finance, as reported by The Wall Street Journal. While unconventional mortgages accounted for just 3 percent of overall originations during that period – traditional mortgage loans declined.

Home Prices Outpacing Wages in 80 Percent of the U.S. Housing Markets

IRVINE, Calif. – Jan. 10, 2019 — ATTOM Data Solutions, curator of the nation’s premier property database, today released its 2019 Rental Affordability Report, which shows that renting a three-bedroom property is more affordable than buying a median-priced home in 442 of 755 U.S. counties analyzed for the report — 59 percent.

Although several housing market experts anticipate the market slowing down in 2019, LendingTree believes that there is no cause for alarm.

In its 2019 forecast, LendingTree predicts slower sales will give rise to an increase of inventory, which could benefit lenders and homeowners.  

“The medium- and long-term prospects for housing are good because demographics are going to continue to support demand,” LendingTree Chief Economist Tendayi Kapfidze writes. “With a slower price appreciation, incomes have a chance to catch up. With slower sales, inventory has an opportunity to normalize. A slowdown in 2019 creates a healthier housing market going forward.”

This should be welcomed news to a market that is already grappling with concerns of affordability and inventory.

Homebuyers are increasingly opting for nontraditional mortgages – Opens a New Window.which helped precipitate the housing crisis about one decade ago – potentially foreshadowing trouble as high prices continue to weigh on housing affordability.

Throughout the first three quarters of last year, unconventional mortgages – those that don’t require borrowers to show typical income or other asset verifying documentation – rose 24 percent to $34 billion, according to data from Inside Mortgage Finance, as reported by The Wall Street Journal. While unconventional mortgages accounted for just 3 percent of overall originations during that period – traditional mortgage loans declined.

Unconventional mortgages are intended to help people with unusual circumstances, such as no consistent salary, get a home loan. However, they are considered more risky because they require borrowers to show less, or even no, documentation – which can lead to deceitful practices. These loans can allow borrowers or lenders to overstate assets to help secure a larger mortgage. A scenario whereby borrowers secured larger mortgages than their means allowed for partially precipitated the 2007 financial crisis

Bill ConerlyContributorLeadership StrategyI connect the dots between the economy … and business!

GDP decline in recessionsDR. BILL CONERLY BASED ON DATA FROM NATIONAL BUREAU OF ECONOMIC RESEARCH AND BUREAU OF ECONOMIC ANALYSIS

Don’t expect the economy to crash in 2019, but be prepared for a possible recession.

Plenty of people are asking about the chance of a crash, which I interpret as a pretty severe recession, like 2008-09. The primary trigger of a full-blown crash would be a financial crisis, when many companies, consumers and other entities have borrowed short to fund long-term assets which start looking dodgy. I don’t think that’s in the cards.

Household finances are improving. Over the last four quarters, their real estate equity is up 10.0%, financial assets up 8.0%, debt up only 3.4%, for a gain in net worth of 8.2%, based on Federal Reserve data.

FICO announced its new credit score model earlier this week, but will it revolutionize the lending industry, or fall through the cracks?

While time may be the only true way to tell the answer to that question, HousingWire spoke to FICO executives in order to determine the vision and capabilities of the new model, UltraFICO.

As we previously reported, UltraFICO has the potential to increase the FICO score for millions of consumers, that is, if they opt in. The new model depends on consumers to “build their own credit score,” and give permission for access to their bank records.

Once this permission is given, FICO, Experian and Finicity team up to provide a score that looks not just at the applicant’s credit file, but also how they manage their personal finances.

FICO explained that this could be a tool to increase homeownership by boosting the score of applicants with thin files, those who have previous marks against them but are working to improve their score or even those who are credit invisible (consumers who have no credit file whatsoever.)

A few weeks ago, we cautioned both lenders and appraisers that with decreased volume, AMCs would be under financial stress. In spite of regulatory guidance to the contrary, lenders still believed they could outsource all risk to their third parties. The guidance has been clear: the use of third parties actually increases risk, not decreases it.

Just for a refresher, here is the OCC Bulletin that can be used as the basis for writing your policies. 

It would appear that the mere act of AMC registration at the state level has created a class of AMCs that, in some cases, are not real businesses. Minimum AMC requirements to register has proffered an air of legitimacy. And when States don’t audit for fundamental business activities, the public trust is violated.

The next 12 months are going to be messy.

Consumers are going to be trapped in many instances where appraisers will refuse to deliver reports based on past due invoices. Appraisers will be stuck once again for lack of third party oversight, mostly by nonbank lenders, and will be left with millions of dollars in unpaid invoices. Lenders lacking in basic understanding of compliance will find themselves at the center of the wrath of the blogosphere. That is headline risk. Tangible losses will occur when appraisers file complaints with state lending regulators against the lenders and also seek judgments in their local courts. My advice to lenders is to get out early on these issues and pay appraisers promptly.

Appraisers are in a very tough position. It is extremely difficult for appraisers to be in a position to properly vet the AMCs with whom they have no prior history. Proceed with caution. Look at the type of clients the AMC has, how long they have been in business, their payment history with others, and the terms and conditions of their payment schedules.

Be careful, folks.

Mortgage application volume fell nearly 10% during the final two weeks of 2018, despite the fact that mortgage rates continued to fall.

According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, total application volume decreased 9.8% on a seasonally adjusted basis during the two-week period ended December 28.

Applications for refinances fell 12% while applications for purchases decreased 8%.

On an unadjusted basis, total volume decreased 46%. Applications for purchases decreased 46% on an unadjusted basis and were down 6% compared with the same two-week period one year earlier.

The average rate for a 30-year fixed-rate mortgage fell to 4.84%, down from 4.86%.

“Mortgage applications fell over the past two weeks – even as the 30-year fixed-rate mortgage decreased to 4.84 percent, its lowest since September 2018,” says Joel Kan, associate vice president of economic and industry forecasting for the MBA, in a statement. “Investors continued to show a preference for safer U.S. Treasuries, as concerns over U.S. and global economic growth, along with uncertainty over the current government shutdown, drove rates lower.

“Even with lower borrowing costs, both purchase and refinance applications decreased over the two-week holiday period, as both conventional and government applications dropped,” he adds. “Part of the decline in mortgage applications was possibly because of the government shutdown, as concerns over delays in FHA application processing times likely contributed to the weakness in activity.” 

The refinance share of mortgage activity fell to 42.7% of total applications.

The adjustable-rate mortgage (ARM) share of activity remained unchanged at 7.6%.

You only have until 02/05/2019

• E-mail: regs.comments@occ.treas.gov.  Include in subject line: “Docket ID OCC-2018-0038 and RIN 3064-AE87 – Real Estate Appraisals”
• E-mail: regs.comments@federalreserve.gov. Include in subject line: “Docket ID OCC-2018-0038 and RIN 3064-AE87 – Real Estate Appraisals”
• E-mail: Comments@FDIC.gov. Include in subject line: “Docket ID OCC-2018-0038 and RIN 3064-AE87 – Real Estate Appraisals”