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In October’s news roundup in the mortgage industry, learn more about Fairway’s legal battles over redlining and overtime, the Federal Housing Finance Agency’s updates to rules on appraisals and waiver access and more.
Click here to read September’s roundup of top mortgage news.
FICO predicted to hike costs for mortgage credit scores by up to 50%
Article by Maria Volkova
MichaelVi – stock.adobe.com
Fair Isaac Corp. (FICO) will once again raise the cost of credit scores, several investment firm reports predict.
Recent notes from Jeffries and Wells Fargo forecast that credit scores could see close to a 50% hike in 2025. The current cost of a mortgage credit score is $3.25 but could reach the $5 range, which would increase the cost of tri-merge reports issued by the three credit bureaus.
Will Lansing, CEO of FICO, in the company’s third quarter earnings call, foreshadowed that prices may rise in the foreseeable future.
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FHFA announces updates to appraisal, repurchase rules
Article by Spencer Lee
Andrew Harrer/Bloomberg
The Federal Housing Finance Agency is updating rules governing appraisals to expand waiver access to more buyers.
Citing success it had seen in current initiatives, the agency said it would change rules governing purchase loans insured by government-sponsored enterprises Fannie Mae and Freddie Mac. The maximum loan-to-value ratio eligible for full appraisal waivers will grow from 80% to 90%. For inspection-based waivers, the LTV ratio increases from 80% to 97%.
“This update represents a sensible step forward in the enterprises’ efforts to promote efficiencies in loan cycle times and cost savings in the broader mortgage market,” said FHFA deputy director Naa Awaa Tagoe at the Mortgage Bankers Association’s annual conference in Denver last month.
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Loandepot on why LOs are trickling back, future growth plans
Article by Maria Volkova
rafapress/Rafael Henrique – stock.adobe.com
Loan originators have been trickling back to Loandepot since the beginning of last year.
A total of 115 loan originators have rejoined the mortgage company’s retail division since January 2023, John Bianchi, executive vice president of national sales at Loandepot, said in an interview.
That number is higher when accounting for those who returned to the shop’s direct consumer channel, he added. Bianchi previously mentioned that over 200 employees total have returned to the organization.
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Fairway agrees to pay nearly $10 million for redlining in Birmingham
Article by Kate Berry
Al Drago/Bloomberg
The Department of Justice and the Consumer Financial Protection Bureau on Oct. 15 hit Fairway Independent Mortgage Corp. with a consent order alleging the company discriminated against applicants in Black neighborhoods in Birmingham, Alabama, by discouraging people from applying for mortgage loans.
The Madison, Wisconsin-based mortgage lender agreed to pay nearly $10 million under a proposed settlement for redlining Black neighborhoods in Birmingham and failing to address known signs of discrimination, according to the consent order. Fairway, the fifth-largest mortgage lender by origination volume, operates in Birmingham under the name MortgageBanc, though it is not a bank.
“This case is a reminder that redlining is not a relic of the past, and the Justice Department will continue to work urgently to combat lending discrimination wherever it arises and to secure relief for the communities harmed by it,” Attorney General Merrick B. Garland said in a press release.
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How warehouse lending shifts are impacting mortgage firms
Article by Bonnie Sinnock
Yurii Kibalnik – stock.adobe.com
Warehouse lending is in flux following a series of recent events creating a mixed outlook for mortgage originations.
For one thing, the return of policymakers’ interest in making downward adjustments to the fed funds rate recently has helped with the costs associated with the short-term financing lines, which companies use to fund their originations prior to selling the loans.
(Warehouse lines typically carry adjustable rates closely tied to fed funds.)
“To take a broad-brush approach, the spread in warehouse improved to the originator,” said Michael McFadden, CEO of OptiFunder, noting that such conditions don’t remain static as the relationship between short- and long-term rates changes with market gyrations over time.
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Pennymac is taking a larger bite out of wholesale competition
Article by Andrew Martinez
Pennymac Financial Services is coming off smaller profits but eyeing a larger play in the wholesale space.
The massive lender and servicer last month reported a net profit of $69 million in the third quarter. That was a drop-off from $92.9 million a year earlier and $98.3 million in the recent second quarter. Its diluted earnings per share also fell to $1.30 per share on revenue of $411.8 million, a steeper drop-off from $1.85 a quarter earlier.
Servicing pretax income slipped in the red to a $15 million loss, an improvement from the prior quarter’s $60 million deficit but far below a $101.2 million profit the same time a year ago. A massive $242 million hedging gain was mitigated by a $402 million fair value change in mortgage servicing rights, as lower market interest rates affected Pennymac’s holdings.
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40-year mortgages: More affordability but more risks
Article by Brad Finkelstein
fizkes – stock.adobe.com
Recently, philanthropist and entrepreneur John Hope Bryant penned an article making a case for having the 40-year mortgage become the standard in order to boost homeownership affordability, especially for first-time buyers.
He would use the Federal Home Loan Bank system as the vehicle for implementing this product, as well as use federal subsidies to reduce the rate.
Nominally the 40-year mortgage would have a higher rate than the 30-year, and it’s not just because any iteration of the product that exists today falls under the non-qualified mortgage category. As with any mortgage, when the term increases, so does the rate.
The trade-off is that the extra 10 years of amortization spreads out the payments.
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Fannie Mae: Fading mortgage rates still won’t aid originations
Article by Andrew Martinez
Fannie Mae foresees more competitive mortgage rates but a resilient “lock-in” effect to close the year.
The 30-year fixed-rate mortgage will end the year at 6.0%, down from last month’s 6.2% projection, according to Fannie’s Economic and Strategic Research Group. Headwinds however remain in climbing home prices and a more recent uptick in rates for most home loan products.
The government-sponsored enterprise didn’t improve its origination outlook for the year, with an anticipated $1.67 trillion in loan volume for 2024, of which $1.3 trillion would be purchase activity.
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LO sues Fairway over unpaid OT, marking her second lender suit
Article by Maria Volkova
Inna – stock.adobe.com
Fairway Independent Mortgage Corp. did not pay its loan officers overtime and failed to reimburse them for work-related expenses, a former employee’s lawsuit claims.
The suit, filed in a Wisconsin federal court by April Shakoor-Delgado, claims Fairway, which employed her from December 2020 to December 2021, did not compensate for any overtime that exceeded 40 hours.
By doing so, the mortgage lender violated state and federal regulations, such as the Fair Labor Standards Act, she said.
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Fannie Mae, Freddie Mac gear up for change involving g-fee
Article by Bonnie Sinnock and Spencer Lee
Fannie Mae and Freddie Mac are taking a new approach to some guarantee-fee changes in coordination with their regulator.
Under the change announced at the Mortgage Bankers Association’s annual meeting in Denver, lenders selling loans into the mortgage-backed securities swap channel will get advance notice of certain pricing changes.
The new policy aims to account for the time it takes to originate a loan for sale into the secondary market, so that a pricing update by either of the two government-sponsored enterprises doesn’t hurt the economics of loans in process at the time it comes out.
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