Sales Boomerang and Mortgage Coach announced an API integration between Mortgage Coach and SaaS technology provider Polly on Thursday.

Real-time data from Polly’s cloud-native Product and Pricing Engine (PPE) will feed into Mortgage Coach Total Cost Analysis (TCA) presentations through this integration, providing home loan comparisons for borrowers.

“Now, lenders can merge the benefits of our high-performance PPE with Mortgage Coach’s ability to multiply borrower conversion,” said Adam Carmel, founder and CEO of Polly, in a statement. “And stay tuned; there is much more to come from Polly’s partnership with Mortgage Coach.”

Sales Boomerang and Mortgage Coach merged in June, about six months after a Philadelphia-based private equity firm LLR Partners invested $80 million, buying stakes in both firms. Together, they formed the Borrower Intelligence Platform (BIP) by combining borrower intelligence with interactive TCA presentations, which allowed mortgage advisors to contact borrowers at strategic times. 

In March 2021, Polly raised $15 million in Series A funding led by 8VC and in January 2022 raised an additional $37 million in a Series B funding round led by Menlo Ventures. In May this year, Polly’s mortgage SaaS technology integrated with mortgage insurance providers like Arch MI, Enact, Essent, MGIC, National MI and Radian.

“Lenders invest significant time and money into building diverse portfolios of loan products designed to meet borrowers’ unique needs, yet those products often sit underutilized,” said Joe Puthur, chief lending officer at Mortgage Coach and Sales Boomerang, in the statement. “Piping Polly’s precise product and pricing data into engaging, data-rich Mortgage Coach TCA presentations solves that problem by making it not only possible, but easy for mortgage advisors to present a wider array of financial solutions to every borrower, every time.”

Sales Boomerang and Mortgage Coach laid off at least 20 employees last month amid significant mortgage market challenges.



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Over the past few years, we’ve seen an increased demand for smart home technology as consumers continue to embrace a digital lifestyle.

“Smart home technology, whether it be keyless entry locks, smart thermostats or leak sensors, these are all things that, five or six years ago, were still pretty new to the marketplace,” said Andre Sanchez, COO of Rently, a smart home and self-guided touring solutions provider. “Now, however, renters actually expect to see this technology in their living spaces.”

The call for smart home technology is coming from inside the house, as it were — but during times of economic pressure, how can investors and property managers justify the effort and expense of upgrading their communities?

Why smart home technology now?

Interest rates are at their highest level in 20 years, and housing inventory is only at about a quarter of what it was in 2008, according to National Association of Realtors Chief Economist Lawrence Yun. More people are renting but still seeking the premier amenities enjoyed by homeowners.

“We are heading into a more turbulent environment in the coming years, and it’s very important that investors and property managers assess their needs,” Rently CEO Merrick Lackner said. “It may seem counterintuitive in this climate to invest, however, there are many economically sound reasons to deploy smart home technology now.”

As an example, Lackner pointed to current staffing shortages leaving leasing offices with fewer people on staff to conduct tours for prospective renters. Self-showing technology like Rently’s can help make up for those losses in productivity.

“Whereas a leasing agent might find it hard to find the time to show properties every day, our technology is essentially allowing somebody to tour any day without being limited by the agent’s schedule,” Lackner said. “It’s a much more cost-efficient way to show properties when we’re in a recession. When you don’t have the headcount to facilitate traditional agent showings, self-showing is a wonderful tool that can keep your leasing goals on pace.”

In addition to enabling a greater number of tours, self-showing technology also maximizes an existing staff’s efficiency and output, he said.

Sanchez added that smart home technology also enhances an operator’s ability to monitor and protect a vacant property.

 “With economic conditions being what they are, we hear about more incidents in the field where there’s potential for property breaches and things like that,” Sanchez said. “With smart home technology, you can see if there’s been activity at the property, especially during a vacancy period – have lights been turned on, have thermostats been turned on, have locks been unlocked? – and that really helps an operator maintain a higher level of security.”’

 Lackner said he believes the current economic environment will ultimately increase the use of smart home technology.

 “It allows owners and operators to maintain their properties better, to be more efficient in their leasing operation, to save money on utilities and to protect their assets,” he said. “In a more turbulent environment, you need to be taking these efficiency and automation steps to be able to reduce costs and keep your portfolio operating at the same caliber. So, I think economic pressure will actually be a catalyst for more smart technology deployments.”

 How does smart home technology benefit investors?

Lackner described two groups of investors in rental properties – groups that directly own and manage their properties, and groups that manage properties on behalf of others. He said both of these groups are motivated not only by the benefits listed above but by the ability for smart home technology to differentiate their properties on the market.

 “In this environment, it’s much, much harder if you want to sell an asset to do so unless there’s something more compelling and differentiated,” he said. “It’s the homes that are better maintained, better painted, have better technology – those actually end up, in a difficult market, having more value for resale or long-term investment.”

Ultimately, Sanchez said that smart home features maximize real estate values both operationally and as investments.

“Number one, it’s easy for your management company to deploy the technology; they’re not just spending money on a platform and not utilizing it,” he said. “Number two, the popularity of the tech helps them lease faster, making sure there’s not a vacant unit that’s sitting on the market, not generating revenue. And third, smart home technology also helps keep that resident and satisfied and less eager to move, stabilizing revenue streams.”

If the renter has a better experience by renting a property that’s equipped with smart home technology, the renter will ultimately be happier and stay longer, reducing churn loss, he said.

“Retaining residents ensures that operators maximize their investments,” Sanchez said.
 

Rently’s Smart Home Technology

Rently’s self-guided touring streamlines leasing by automating property showings, and its smart home technology helps property managers fulfill key operational tasks including property access, energy management, property security, and damage prevention.
 
Because Rently follows an open and flexible product integration approach, all of their solutions can be easily integrated with most popular property management systems, eliminating technical frictions that sometimes occur when properties change ownership – something that happens more often in turbulent economic times

Rently’s newest product innovations include a dynamic mapping feature that renters use to navigate property tours and a common area access panel that secures shared amenity spaces, such as pools, gyms or package delivery areas.

“At the end of the day, it’s all about being that customer-centric product that provides property owners with everyday benefits and long-term value,” Sanchez said.

For more information on Rently’s smart home technology, visit Rently.com.



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The Federal Reserve Chairman Jerome Powell said during a Wednesday afternoon speech at the Brookings institute that monetary policy affects the economy and inflation with uncertain lags, and the full effects of the ongoing tightening have yet to be felt. 

The mortgage market, however, tells a different story. 

So far, the market has quickly reflected the impact of the Fed’s moves. To illustrate, mortgage rates are on a downward trend amid signs that inflation has started to cool down. In turn, the Fed may reduce the pace of the federal funds rate increases. 

The tightening monetary policy has resulted in a cumulative 375 bps hike: 25 bps in March, 50 bps in May, and four subsequent 75 bps increases in June, July, September, and November. Fed officials will meet on December 13 and 14, and the bets are on a 50 bps hike. 

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said at the Hutchins Center on Fiscal and Monetary Policy in the Brookings Institution.  

Powell’s statement alone was enough to bring the Treasury yields down. The 10-year note went from 3.75% on Tuesday to 3.68% on Wednesday. It then dropped to 3.59% on Thursday morning.  

“Bond yields fell when Powell talked about the fact that the Fed officials don’t want to raise rates too much,” said Logan Mohtashami, lead analyst at HousingWire. “The bond market found some buyers, and mortgage rates should be lower Thursday.” 

“The last time we saw a big drop in yields was after the CPI report came in lighter than expected in November, meaning inflation targets were missed. It dropped mortgage rates too,” he added.

The mortgage market reaction

Mortgage rates tend to align with the 10-year U.S. Treasury yield. This means that when bond yields fall, mortgage rates will typically go down, a relationship that has existed since 1971, according to Mohtashami. 

As expected, the 30-year fixed-rate mortgage decreased to 6.49% this week, down nine basis points compared to the previous week, according to the latest Freddie Mac survey. The same rates averaged 3.11% one year ago. 

“Mortgage rates continued to drop this week as optimism grows around the prospect that the Federal Reserve will slow its pace of rate hikes,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Even as rates decrease and house prices soften, economic uncertainty continues to limit homebuyer demand as we enter the last month of the year.”

Mortgage rates differed slightly on other platforms. Black Knight‘s Optimal Blue OBMMI pricing engine, available on HousingWire’s Mortgage Rates Center, measured the 30-year conforming rate at 6.54% on Wednesday, down from 6.56% the previous week. 

The current measure at Mortgage News Daily shows the 30-year fixed rate at 6.29% for conforming loans as of Thursday noon, a 34 bps decline compared to one day prior. 

“The Fed is indicating that the aggressive rate hikes this year have been enough to start slowing inflation. Markets also welcomed today’s PCE price index—the Fed’s preferred inflation metric—which showed that growth is slowing,” George Ratiu, Realtor.com’s manager of economic research, said in a statement. 

Mohtashami said rates should be even lower. 

“If the mortgage back securities market was working properly, rates should be under 6% today,” he said.But the mortgage back securities market isn’t running great still because the biggest buyer of the market, the Fed, over the years has left and has no desire to get into this marketplace for now – it’s not worth the risk.” 

The Mortgage Bankers Association (MBA) also expects rates to continue the downward trend, according to the trade group’s president and CEO, Bob Broeksmit. 

“The 30-year fixed mortgage rate has fallen nearly 60 basis points over the past four weeks, which has drawn some prospective buyers back to the market,” Broeksmit said in a statement. “With signs of economic slowing both in the U.S. and globally, mortgage rates will remain volatile but are likely to continue to trend downward.”

The latest MBA forecast indicated mortgage rates will finish the year at 6.7%.   



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Interest rates and inflation continued to dampen activity in the housing market across all 12 Federal Reserve districts, according to the Fed’s latest Beige Book.

“Higher interest rates further dented home sales, which declined at a moderate pace overall but fell steeply in some Districts,” the report states, noting that “residential construction slid further at a modest pace” and “home prices grew less rapidly or declined outright amid weak demand.”

Higher mortgage rates, inflation and recession fears are the key factors holding back home demand in districts including Boston and Philadelphia, said the economists, market experts and business organization leaders interviewed for the report. 

In the New York and San Francisco districts, potential homebuyers opted to rent instead of purchasing due to elevated prices and higher mortgage rates. Following dampened activity from buyers, sellers provided increased concessions, such as temporary rate buydowns or paying closing costs to complete sales, the report noted. 

The economic outlook remained dim – “interest rates and inflation continued to weigh on (economic) activity,” interviewed experts said, and “expressed greater uncertainty or increased pessimism.”

In the Dallas district, housing outlooks worsened, with those interviewed expecting “further erosion in sales and home starts in the near term.”

Fannie Mae also had a gloomy outlook for the housing market next year, citing lower home sales and mortgage origination activity compared to 2022 amid elevated mortgage rates. 

Single-family home sales are projected to drop to 4.42 million in 2023 from 5.67 million this year, and mortgage origination activity is forecasted to slip to $1.74 trillion from $2.34 trillion.

Mortgage rates, affected by inflation and higher interest rates, have been on a declining trend in recent weeks after peaking about a month ago at 7.16%. Following October’s inflation slowdown, the Fed indicated smaller interest rate hikes in December following its four successive raises of 75 basis points. (The Fed’s short-term rate does not directly impact long-term mortgage rates, but it does steer market activity to create higher rates and reduce demand.) 

“The time for moderating the pace of rate increases may come as soon as the December meeting,” Fed chair Jerome Powell said Wednesday in his final public remarks at Brookings Institution before the Fed’s meeting on December 13-14. 

Lower rates have already impacted purchase demand, which have risen for four consecutive weeks, Logan Mohtashami, lead analyst at HousingWire, said.  

“If rates can keep heading lower, toward 5%, that can stabilize the housing market which is still in a recession,” Mohtashami said. 

Fannie Mae forecasts mortgage rates to pull back over the next two years. This reflects a view of moderating 10-year Treasury rates as the Fed Reserve eventually ends its tightening stance, as well as a contracting economy and compression of the Treasury-mortgage rate spread once interest rates stabilize.

The information and data for the current Beige Book – released in November – was collected on or before November 23. The Beige Book reports, published eight times a year, are based on interviews with bank directors, business and community organization leaders, economists, market experts, and other sources. 

Following are excerpts of statements on housing conditions from each of the 12 Federal Reserve districts – drawn from the recently released Federal Reserve Beige Book

***

Boston – The First District’s residential real estate market continued to weaken in September and October … Closed sales were down over-the-year in all reporting markets (which exclude Connecticut), representing a moderate deceleration in sales for single-family homes and a substantial deceleration for condos. Contacts continued to cite sharply higher mortgage rates, inflation, and recession fears as the key factors holding back home demand. Inventories fell again on a year-over year basis in most markets.

New York – The home sales market weakened noticeably in recent weeks, and the rental market showed signs of softening. With homes now taking longer to sell, many sellers have taken their homes off the market. Residential rental markets have weakened, except at the high end of the market, where many potential buyers are instead opting to rent. Overall, rents across New York City have declined, and concessions have edged up for the first time in a year. 

Philadelphia – Homebuilders reported that contract signings for new homes plunged after declining slightly in the prior period. Their current backlog will carry construction through the first quarter with only a modest decline in activity, but not much further. Existing home sales fell steeply in most markets. They (brokers) noted that high prices combined with rising interest rates have reduced housing affordability significantly and have driven potential buyers from the market. 

Cleveland – Housing demand continued to decline from levels that were already down significantly from recent peaks. Contacts noted that many potential buyers have found it difficult to qualify for mortgages amid higher interest rates. Contacts did not expect demand would improve soon because interest rates are expected to remain high. One real estate agent stated that “the snowball will continue to roll down the hillside with nothing to stop it.”

Richmond – Demand for housing slowed considerably this period with reduced buyer traffic and listings. Days on market and inventory levels have increased but were still below normal levels. Respondents indicated that there were fewer closed and pending sales due to higher interest rates and low inventory. In most markets in the Fifth District, home prices remained unchanged, but sellers were offering more concessions, such as temporary rate buydowns or paying closing costs, to complete sales. Buyers were not having any difficulty obtaining mortgages and there were no issues with appraisals. New home construction also slowed down this period, and builders were no longer acquiring new lots due to high building costs and economic uncertainty

Atlanta – Housing demand continued to deteriorate as mortgage rates rose and affordability further declined. Existing home sales dropped sharply and inventory levels rose in most markets. Although home prices remained above year-ago levels, monthly sales price growth continued to moderate. The new home market decelerated at a faster rate, with a sharp decline in new orders and a rise in cancellations. Builders pulled back on starts but the inventory pipeline remained elevated, with the bulk of units to be delivered through the first quarter of 2023. 

Chicago – Residential construction moved down modestly, largely in the single family segment. Delays and cancellations increased for both single- and multifamily projects. Homebuyers were shocked by how quickly mortgage rates had risen, according to a contact. Home values were down modestly, but rents were up again.

St. Louis – The residential real estate market has slowed modestly since our previous report. Contacts reported demand has slowed due to 7-percent mortgage rates. Pending home sales have decreased and inventory is up. Louisville contacts reported closings are down about 30 percent in the past few months. 

Minneapolis – Single family permitting levels were notably below year-ago levels in most parts of the District. Residential real estate continued to decline. Closed sales in October were widely lower across the District compared with last year, and often by sizable amounts, including 31 percent across Minnesota. Contacts in Montana reported that banks were laying off several dozen staff related to slowing mortgage activity.

Kansas City – Multifamily housing real estate activity declined abruptly in recent weeks. This decline arose despite a backdrop of elevated demand for housing across the District and declining prices for construction materials. The downshift was attributed solely to higher interest rates and the outlook for higher rates over the near term.

Dallas – Sales slipped again and contract cancellations stayed elevated as high mortgage rates priced buyers out of the market. Among the major Texas metros, Austin appeared to be the roughest market and was experiencing larger price declines to generate sales. Buyer incentives increased notably, putting downward pressure on home prices and builders’ margins. Outlooks worsened, with contacts expecting further erosion in sales and home starts in the near term. 

San Francisco – Demand for single-family homes fell overall due to elevated prices and rising mortgage rates. One contact in Southern California noted that potential homebuyers have opted to rent instead, and a Northern California contact reported a change in scope for some single family construction projects, now built to rent rather than to sell.  Selling prices across the District remained high but began to stabilize, with price reductions in some markets. Across the District, inventories remained limited but increased somewhat in recent weeks as homes took longer to sell. Residential construction activity declined notably across the District. 



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Purchasing adequate landlord or property insurance for your investment property is vital if you want to protect your income and maintain long-term financial security. However, the coverage to which you’re entitled will depend on the terms and conditions of your policy. As such, you must read every part of a property insurance policy form before proceeding with a deal. 

Ideally, we recommend comparing insurance deals alongside someone with insurance expertise to help you make an informed decision. While some insurance providers may appear to offer irresistibly cheap rates, they may not deliver the full coverage you need to protect yourself from all eventualities. A financial expert or insurance agent will quickly spot any holes in an insurance policy and ensure you don’t lose money unnecessarily. Of course, it’s also a good idea to learn as much as possible about the insurance landscape to ensure you’re well-equipped to engage with insurers and make decisions that work for you.

What Do Insurance Policies Include?

One of the first things to understand about insurance policies is that they come with seven key components, including:

  • Declarations: Declarations appear on the first page(s) of your policy and specify the name of the person to whom the insurance applies, the relevant policy address, a summary of the policy, policy limits, and other vital points of information.
  • Insuring agreements: This part of the policy outlines who, what, and how the insurance provider is insuring the client.
  • Definitions: The definitions page clarifies any key industry terms used in the policy.
  • Coverages: This section states the amount of risk or liability protected under the insurance policy, including which items or parts of the property the policy covers.
  • Exclusions: This section is designed to clarify any questions about coverages by explicitly stating what the policy does not protect.
  • Conditions: The conditions of your policy lay out the circumstances under which coverages apply.
  • Endorsements: Also known as an addendum, an endorsement refers to an amendment to a policy document.

Key Questions To Ask About Your Property Insurance Policy 

Before you purchase an insurance policy form, you must ask yourself a few vital questions. These include: 

1. Is it a named peril or an open peril policy?

Named peril policies only cover events explicitly listed in the policy form. These types of policies can be split into two categories – basic and broad. Basic insurance policies cover the following named perils:

  • Fire
  • Lightning
  • Storms or hail
  • Explosions
  • Smoke damage
  • Damage caused by aircraft or vehicles
  • Riots or civil unrest
  • Vandalism or malicious damage
  • Leaks caused by sprinklers
  • Sinkhole collapse 
  • Volcanic activity

Broad-named perils are tailored specifically for property and include additional protection areas on top of the basic form policies, including:

  • Burglary
  • Fallen objects
  • Ice or snow
  • Frozen plumbing
  • Accidental water damage
  • Electricity

Open peril policies, on the other hand, offer cover for losses linked to perils that are not explicitly ruled out by the policy. Such policies are often more expensive than named peril coverage, although they may provide better protection. Basic vs. broad coverages will vary from carrier to carrier. 

2. Does your policy offer replacement cost or actual cash value coverage?

If your insurer provides replacement cost value (RCV) for damaged items, they’ll reimburse you for the amount needed to replace the item without taking depreciation into account. If they offer actual cash value (ACV), on the other hand, you’ll receive the cost of replacing your property minus the amount of money by which it has depreciated due to wear and tear. Broadly speaking, RCV is considered a superior form of insurance for property owners. Each policy addresses ACV or RCV for dwelling coverage separately from personal property, i.e., if a customer wants RCV on both the dwelling and contents, they need to check both. They are addressed separately in the policy. 

3. Are flood and earthquake coverage excluded?

Damage caused by floods and earthquakes is often excluded from insurance policy forms. If your landlord or property insurance doesn’t cover floods or earthquakes, you’ll need to take out a separate policy, particularly if you live in an area prone to flooding or seismic activity. You may also be able to add flood and earthquake coverage as endorsements on your existing policy, although this will depend on your insurance carrier’s policies. 

4. Are your defense costs outside the limit of liability?

Insurance claims sometimes come with a range of defense costs, including lawyer fees, costs of expert witnesses, court costs, and fees associated with filing legal papers. Why? Well, insurance claims are not always clear-cut, and you may need to demonstrate that you are not liable for the damages in question. Defense costs can quickly add up, potentially threatening your reimbursements. This vulnerability is known as liability loss exposure – in other words, the possibility a person or business will lose money due to a claim made against them asserting their legal responsibilities for certain damages. 

If your defense costs are inside the limit of liability, they’ll be the first expenses deducted from your policy limit when you want to make a claim. If your defense costs are outside the limit of liability, then your insurer offers separate limits or even unlimited funds for defense costs. In such a case, your defense expenses will not erode the sum total of your final settlement. Obviously, you should try to obtain coverage that provides defense costs outside the limit of liability. You may wish to consider taking out liability insurance, which transfers the burden of financial losses due to liability claims from the insured and onto the insurance provider. 

5. What kind of water damage does your policy cover?

Water damage represents one of the most common (and most costly) insurance claims by property owners. However, identifying and claiming for water damage is a little more complex than you might expect. While your policy may cover one type of water damage, it may not cover another type. Most property and homeowners’ insurance policies cover the following types of water damage:

  • Water damage after a fire: Most insurers will cover damage caused by the water used to extinguish flames, such as water from a hose or sprinkler system.
  • Accidental leaks: These include leaks from appliances or faulty plumbing.
  • Burst pipes: Insurers typically cover burst pipes caused by very cold weather. However, they will not cover bursts caused by neglect of the property and insufficient heating. 
  • Roof leaks: Your policy is likely to cover water damage caused by severe storms or fallen trees. However, you’ll need to be proactive about fixing the roof quickly, or you won’t receive coverage for further water damage.
  • Ice dams: You may be eligible to claim for ice dams that form in your gutter quickly and damage your home. However, this claim may be void if the damage is related to poor maintenance.

As mentioned, a standard property insurance package is very unlikely to cover flood damage, including damage from tsunamis, storm surges, hurricanes, very heavy rain, and rivers that have burst their banks. If you live in a flood-prone area, you’ll need specialized flood insurance. Other types of water damage your policy is unlikely to cover include:

  • Water damage caused by leaks through a foundation.
  • Cost of broken appliances: While you may receive compensation for water damage caused by a faulty washing machine, you cannot claim the cost of the washing machine itself.
  • Water damage caused by negligence: Failure to address plumbing issues when they arise will harm your claim. 
  • Water damage caused by earthquakes.
  • Water damage related to backed-up sewers or drains: If you’re worried about this problem, you may need to purchase tailored coverage. This is typically available via endorsement to the standard landlord policy and varies by carrier. 
  • Water damage caused by a sump pump fault. 

6. Will your insurer change your roof coverage when it reaches a certain age?

Some insurance providers alter roof coverage when the roof in question reaches a certain age, changing the reimbursement terms from replacement cost value to actual cash value. Whether or not this applies to your policy will depend on your state. For example, Texan insurers tend to be stricter about insuring older roofs at replacement cost, given the frequent and severe hail and thunderstorm activity in the state.

In fact, it’s worth considering the location of a property and the age of its roof before making an investment. Roof costs could represent a significant cause of profit losses if you’re not careful and fail to pay attention to your insurance exclusion. Other exclusions include cosmetic damage that doesn’t affect the roof’s functionality.

The Bottom Line: Always Read Your Policy!

While reading insurance policy forms may not sound like a thrilling activity, it’s a vital part of protecting your investment property. Without adequate coverage, you could be hit with a huge bill that jeopardizes your finances and even puts your tenants at risk.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.



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Relief from the rate-driven volume reduction afflicting both the primary and secondary mortgage markets is expected to be elusive for some time to come, at least in terms of any renewed refinancing boost.

That’s according to David Petrosinelli, a New York-based senior trader with InsphereX, a tech-driven underwriter and distributor of securities that operates multiple trading desks around the country.

“We’re going to have a Fed-induced consumer slowdown,” Petrosinelli said. “We’re going to have a housing correction.”

That correction, well underway, has taken a hammer to the performance of the private-label and agency mortgage-backed securities (MBS) markets, which are tied closely to lenders’ success in growing mortgage originations. The Federal Reserve’s rate-hiking campaign to combat inflation has chilled originations in the primary mortgage market, with some lenders’ origination volume is down as much as 75% year over year.

Consequently, the collateral available to support securitizations in both the agency and nonagency secondary markets has also fallen.

We’ll have a lag in when people refi because even if there is a rate incentive to do it, there may not be the price incentive to do it.

David Petrosinelli managing director at InsphereX

Petrosinelli said that even if the Fed takes its foot off the accelerator on the rate front sometime during the first quarter of next year, as some market experts predict could happen in the best-case scenario, there will still be a lag effect before conditions improve for the housing industry. 

“The Fed on average … over the last two decades, usually cuts rates about four or five months after the Fed funds rate has peaked,” he said. “The Fed could begin cutting rates by June [of next year], in the summertime, by that metric.

“But it’s not just rates, because property values will probably also have continued to drift lower, so ultimately, if you want to refi, I don’t imagine that it would be very easy to do that if you’re off 5% to 10% in prices. We’ll have a lag in when people refi because even if there is a rate incentive to do it, there may not be the price incentive to do it.”

HousingWire spoke to a half-dozen industry pros in the primary and secondary markets for their takes on when normalcy might return.

Dour outlook

A recent report on the private-label residential mortgage-backed securities (RMBS) sector by the Kroll Bond Rating Agency (KBRA) reveals that a dour outlook for the mortgage-origination market also reverberates in the secondary market.

“Unsurprisingly, 30-year mortgage rates are near 7%, up almost 5 points this year, a level virtually unfathomable during the past decade,” the KBRA report states. “The magnitude and speed of this change has contributed to an unfavorable spread environment that has continued to negatively affect issuance across all sectors of RMBS in [the second half of] 2022.”

KBRA defines RMBS as all nonagency prime, nonprime (including non-QM) and credit-risk transfer issuance.

We project Q4 2022 to be the lowest RMBS securitization issuance volume in any quarter since 2016, closing at less than $6 billion.

Analysts at Kroll Bond Rating Agency

“KBRA now expects full-year 2022 RMBS issuance to top out under $102 billion,” the report continues, “down from a heady $122 billion [in 2021]. Such an outcome would equal an almost 17% decline relative to 2021 volume.” 

On the bright side, KBRA also notes that 2022 will still be the second highest RMBS issuance year since the global finance crisis some 15 years ago and nearly double the $55 billion issuance mark in 2020. Still, much of that good news for 2022 is front loaded.

“In terms of quarterly issuance, it tapered quickly in Q3 2022 and did not reach our projected issuance expectations of $20 billion, instead closing at almost $17 billion,” the report states. “Similarly, we project Q4 2022 to be the lowest RMBS securitization issuance volume in any quarter since 2016, closing at less than $6 billion.”

For 2023, KBRA expects the mortgage interest-rate environment to remain elevated “as will other sector headwinds, including home-price declines, high inflation and potential volatility owing to changing economic conditions and geopolitics.” 

Those factors will contribute to a 40% decline in RMBS volume in 2023, down to $61 billion, according to KBRA’s projections.

The outlook for agency MBS issuance — securities issued by government-sponsored enterprises such as Fannie Mae or Freddie Mac — is equally grim, according to Robbie Chrisman, head of content at Mortgage Capital Trading (MCT).

“Gross issuance of all agency mortgage bonds has declined for eight straight months to now sit at its lowest level since April 2019, below $100 billion a month and about one-third of what we were experiencing at this point last year,” Chrisman wrote in a November market-outlook report. “That trend likely won’t change going into the new year, as December, especially its latter half, sports the lowest average daily trade volume for any period of the year.”

Agency mortgage-bond gross issuance, Chrisman notes, is projected to end 2022 at around $1.8 trillion, compared with the $3.3 trillion average posted during the boom years of 2020 and 2021.

The drop-off in agency and nonagency MBS issuance makes sense when you consider the most recent origination forecast by the Mortgage Bankers Association, which shows overall loan production declining from $4.43 trillion in 2022, to $2.24 trillion for this year and $1.97 for 2023. The bulk of that decline is on the highly rate-sensitive refinancing side.

MBS challenges

From the point of view of investors and broker-dealers, Petrosinelli said, the current MBS market is not all that attractive, given the volatile rate environment. 

“I remember the first few bonds I bought [decades ago],” he recalled. “My boss kind of looked at me and scratched his head. I said, ‘Look at the yield on this bond.’ And he said, ‘Well, the coupon is 200 basis points below Fed funds.’”

If the bond’s coupon rate is lower than prevailing interest rates, then the bond’s price is discounted. That can be a problem for the holder of the bond in a rising rate environment.

“… Particularly if you’re a broker-dealer, owning that kind of coupon, you’re upside down to start because there’s a carry cost with that,” Petrosinelli added. “So, you have to make all of your profit on price appreciation.”

“It’s just a tough scenario to get really excited about, and it’s probably one of the reasons why you see the Street is really not flush with [RMBS] inventory now, which is an understatement.”

Until the Fed concludes their hiking cycle, volatility and illiquidity in the secondary market will continue,” he said. “Once the Fed stops raising rates, the market could be expected to normalize.

Andrew Rhodes, senior director and head of trading at MCT

Thomas Yoon, president and CEO of non-QM lender Excelerate Capital, said the lender postponed plans to conduct its first private-label securitization offering this year “because the last thing we want to do is go to market for the first time and get crushed.” He added that “the premium goes away [on a securitization deal] if rates jump too fast.”

“In the worst-case scenario, [some lenders] may securitize to get the assets off their balance sheet, but they might lose money doing it,” he explained.

Andrew Rhodes, senior director and head of trading at MCT, stressed that persistent inflation is “the major headwind” confronting the housing market.

“Until the Fed concludes their hiking cycle, volatility and illiquidity in the secondary market will continue,” he said. “Once the Fed stops raising rates, the market could be expected to normalize.”

John Toohig, head of whole-loan trading at Raymond James, said as rates continue to rise, “that’s just going to continue to put pressure on supply.”

“There’ll be fewer loans originated [going forward], so there will be fewer loans able to go into a bond issue,” he added.

Keep hope alive

Sean Banerjee, co-founder and CEO of ORSNN, a Seattle-based fintech start-up that offers lenders and private-equity funds access to a cloud-based electronic whole-loan trading platform with embedded quantitative analytics capabilities, sees the dropoff in mortgage originations due to rising rates as the main driver of “the shrinking securitization market.” 

Over the longer term, however, especially if we face a recession in 2023, resulting in a more stable to declining-rate environment, Banerjee says the reduced mortgage production could create favorable pricing conditions for the both the agency and private-label securitization markets.

“Based on lower volumes, the market could become more efficient,” he said. “If [loan] issuance is slow to recover, which it may be due to tightened lending [standards], a possible recession [next year] and associated unemployment, an intriguing supply-demand dynamic can occur.”

A substantial secondary infrastructure was built to accommodate the behemoth agency MBS issuance during 2020 and 2021, and now those operations — as well as whole-loan trading businesses — need to be right-sized for the new normal.

Miki Adams, president of CBC Mortgage

He added that such a “recession scenario” could bode well for the MBS market in 2023 — even as the nonbank lender market undergoes a major restructuring. That in turn, would make the MBS market a more attractive liquidity outlet for the surviving lenders.

“If there are fewer [quality loan] pools to choose from, [sellers] are going to be able to command a higher price than they would in today’s current market just because of the lack of supply,” he explained. “That same dynamic holds true for agency MBS as well as nonagency.”

Miki Adams, president of CBC Mortgage, a provider of down-payment assistance and one of the largest nonbank second-mortgage lenders in the country, summed it up this way: 

“A substantial secondary infrastructure was built to accommodate the behemoth agency MBS issuance during 2020 and 2021, and now those operations — as well as whole-loan trading businesses — need to be right-sized for the new normal.”



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Given the market contraction and numerous layoffs in the industry, it may be surprising to think that loan officer recruitment and retention could be a focus for some lenders and independent mortgage banks right now. 

But due to the reduction of volume, it’s extremely important for lenders and IMBs to be able to replace that lost volume – and the quickest way to do so is to bring money in through revenue. Rather than cutting costs and reducing expenses, some shops are instead choosing to grow.

The battle for LO talent is even more prevalent among IMBs, as mortgage is their single revenue stream. 

“Yes, there is a war for top talent,” said Robert Lipston, EVP of Loan Production at Evergreen. “We’re not looking for everyone – we’re looking for the right ones.” 

Why do LOs move shops?

In an environment laden with rate changes and layoffs, you’d think LOs would stick with their current shop and hope to come out of the storm intact. But that’s not necessarily true. 

Loan officers tend to move shops for one of two primary reasons: pain or gain. 

“LOs seem to start looking when they struggle to effectively close loans,” said Dianne Crosby, Regional Manager/SVP of Mortgage Lending at Guaranteed Rate. “LOs who are happy do not want to take on the hurdle of a transition even if there might be better rates or a wider array of loan programs with the new employer.” 

Those struggles can be attributed to a few factors. One that’s often cited is a lack of tools, product mix or support. 

“So many companies have done so many layoffs that some of the pain is they don’t have enough staff to support the existing talent they have today,” said Ryan Hills, Regional Director at Movement Mortgage. “It’s hard for [LOs] to produce when they’re stuck in the office because they don’t have support.”

LOs may also look to transition to a new shop if they fall out of alignment with their current leadership. A big part of why some LOs are leaving their current shops today is because the leaders of those companies – and to be fair, the LOs themselves – are operating from a place of fear. 

Hills called it a security or longevity play – lenders want to make sure that they’re on a safe ship to “weather the storm.”

“They get the sense that with all of the organizations struggling through this, ‘maybe my organization won’t make it through, I need to find a plan B,’” he said.

Some companies aren’t seeking opportunities in the market; instead, they’re having the “knee-jerk reaction” of “cutting bottom-line expenses,” Lipston said. 

“A lot of loan officers today are moving because companies are in a fear base and they’re not using this as an opportunity; they’re shrinking down and making their companies smaller to try to navigate through the storm versus adding good talent and good people,” he said. 

On the flip side, some LOs are motivated to move to a new shop, rather than away from their current organization. These LOs see an opportunity to “gain” by working with lenders that are willing to lean into the market, find opportunity among adversity and create products for LOs and their customers to win with. 

What are LOs looking for in a new shop?

“To upset your current system and agree to leave people you know and an organization that has been basically working for you, there has to be a compelling reason,” Crosby said. 

Many people would cite products, pricing and compensation. But those aren’t always the deciding factor, according to Hills.

“They’re very comparable, if you stacked us all up, and most people aren’t honest enough to say, the comp is very comparable, the pricing and the rates are very comparable,” Hills said. “We all kind of have very similar offerings in that.”

He said these are important factors, but, “it does come down to the culture and the value alignment of the leadership and the team that you’re working with.”

“I believe that people work for people first, organizations second,” Hills said. 

That leadership factor is crucial, and often what drives the culture at a shop. 

“Culture is the No. 1 stickiness that you provide your team to win every day,” Lipston said. “Culture is not a word; it’s a tangible executive strategy that allows your company to set itself apart.” 

Technology does play its own role in LO recruitment and retention, however. 

One way shops can retain LOs is by leveraging tech to help them build, manage and pull more loans out of their pipelines. Some tech now can even predict when a borrower is getting ready to refinance or move, adding value to an LO’s existing pipeline. 

“If you can, arm your loan officers with that technology,” Hills said. “That will obviously help the retention because they’re not going to want to leave if the organization is helping them retain their business and even growing it.”

What should leadership be focused on for LO retention?

Lender shop leadership should be offering opportunities to add volume to their salesforce, including creative products, additional marketing opportunities and investing in their LOs with new ideas and tips on how to win more business.

“You better have a force field around your people today, because if you don’t take care of them, they’re exiting your company,” Lipston said.

Leadership should also be transparent with their LOs and offer support. Many LOs are dealing with low morale after two good years of volume amid a pandemic, followed by a huge drop in volume. 

“One of the ways that you can keep people positive is addressing that every week, every month, having your CEO come on board and speak to that,” Hills said. “And also giving them vision, being transparent with the financials, letting them know they’re on the strong ship right now.”

And leadership can always turn to LOs to ask what they can provide.

“Ask the talent what they need, carve out resources and follow up to make sure they feel supported, valued and heard,” Crosby said. 

Ultimately, investing in your LOs is an investment in your company’s future. 

“We’re planting seeds for the next market, for the next year, for the next year after that,” Lipston said. “It’s all about looking forward and vision, and getting the right people on the team today to build the winning platform for the future.” 



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Mortgage fairness for Black and Native Americans is no better today than it was 30 years ago, according to a new mortgage fairness report.

The report, issued by “fairness-as-a-service” solution firm FairPlay AI, was based on a study of more than 350 million mortgage applications from 1990 to 2021. The applications were obtained from public data in the Home Mortgage Disclosure Act (HDMA). 

Fairplay used the industry standard metric Adverse Impact Ratio (AIR), which compares the rate of approval for protected status applicants to a control group. For instance, if protected class applicants had a 60% approval rate and the control group had a 90% approval rate, the AIR would be 60/90, or 67%. An AIR of less than 80% is considered a statistically significant disparity.

According to the report, Native American mortgage applicants’ loan approvals dropped by more than 10 percentage points, to 81.9% in 2021 from 1990. 

AIR for Black homebuyers rose modestly to 84.4% in 2020 and 2021, up from 78.4% in 1990. This was “likely attributable to massive government stimulus and other support programs designed to stabilize the housing market during the COVID-19 pandemic,” according to the report. The ratio remained unchanged in 2019 compared to 29 years ago, the report showed.

“Despite decades of government intervention and the growth of high-priced consultancies devoted to fair lending practices, there is clearly much work to be done,” said FairPlay CEO and report co-author Kareem Saleh. 

Black homebuyers endure deep and persistent disparities in loan approvals in five areas, including Los Angeles, Alabama and South Carolina, according to the report. In 2021, Black homebuyers in these areas were approved at 69% of white mortgage applicants.

Mortgage fairness for rural Black populations had an AIR of 74% in 2021, lagging behind the fairness of the urban population, which had an AIR of 83% in 2021. 

Bias in lending is a challenge that the mortgage industry has been struggling with, as seen from a handful of suits. Appraisal firm 20/20 Valuations and appraiser and mortgage lender loanDepot were sued by a Maryland couple earlier this year who claimed their home was appraised at a far lower value than it was a few months later when they removed indications that a Black family lived there.

In July 2022, Movement Mortgage paid $75,000 to resolve allegations of racial discrimination against Black and Hispanic borrowers seeking mortgages in the Seattle-Tacoma area. Undercover testers from the National Community Reinvestment Coalition filed a complaint claiming that the South Carolina-based lender had significantly higher application withdrawals and lower approvals in majority-minority census tracts compared with majority White census tracts, which it said amounted to redlining.

On a positive note, mortgage fairness for Black women improved to 86.3% in 2021 from 69.8% in 1990. Hispanic Americans have seen a steady increase in mortgage approval fairness, increasing to 87.7% in 2021 from 77.7% in 2008. HDMA data on Hispanic applicants only dates back to 2008.

Asian Americans have consistently maintained comparable levels of mortgage approvals to White applicants since 1990, according to the report. 

Saleh urged policymakers, regulators and lending institutions to look into ways to encourage lending fairness.

“If we want to extend the American dream to historically underrepresented groups, we must start encouraging new approaches to lending fairness,” Saleh said.



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JPMorgan Chase will soon be issuing its first non-prime MBS secured exclusively by investor loans that are underwritten based on rental income.

JPMorgan Mortgage Trust 2022-DSC1 is secured by 980 debt service coverage ratio (DSCR) loans with a balance of $308.2 million, according to a Kroll Bond Rating Agency presale report. The collateral has seasoned for just under 12 months, the report says.

Though the loans were originated by more than 100 lenders, non-QM entity Sprout Mortgage, which crashed and burned in July, has the largest share or originations at 19.9%. Chicago-based Interfirst Mortgage Company originated 11% of the loans in the pool. No other originator issued more than 10% of the pool.

The relative strength of DSCR

The JPMorgan Chase MBS offering highlights the relative appetite investors have for business purpose loans, at least in comparison to agency loans.

In its November report, mortgage trading platform MAXEX wrote that agency-eligible investor transactions have “dissipated dramatically over the last six months,” with a second-straight month of zero issuances coming in October.

But “investment properties across the product spectrum have remained popular among non-agency lenders and investors alike,” the MAXEX report reads. “Investment property loans—jumbo, conforming or DSCR—have represented greater than 25% of MAXEX lock volume for 3 consecutive months. Continued strength in the rental market, punitive LLPAs from the
Agencies and the continued growth of short-term rentals such as AirBnB and VRBO all contribute to this trend.”

Since the higher LLPAs on investor properties came into effect, MAXEX buyers introduced two DSCR programs and the exchange started to see more volume of non-owner occupied loans flow through the conforming offering, MAXEX said.

There are still many headwinds in the space, including wide spreads and volatility.

Redfin also reported that companies bought roughly 66,000 homes in 40 markets it tracks in the third quarter, down about 30% from 94,000 homes during the same period last year. It was the biggest percentage decline in investor purchases since the subprime crisis (excepting the early part of the pandemic when restrictions were in place).

Rent growth has also slowed to 10.1% on single-family homes in September, down from 13.9% in April, according to CoreLogic.

The offering

In its pre-sale report, KBRA noted that the average borrower’s FICO score was “moderately strong” at 740, with the current average loan-to-value ratio at 68.4% and the average DSCR at 1.41. DSCR loans are underwritten to account for rental income on a property and do not factor the borrower’s income into the equation.

For this pool, about 20% of the loans are geographically concentrated around New York City, and other high concentrations are in Miami, Los Angeles, Baltimore/D.C. Dallas, and Atlanta. The loans are primarily backed by single-family residences (62.14%), two- to four-family homes (33.8%), and condominiums (4.07%).

KBRA analysts noted that 63% of the loans are collateralized by properties with leases in place and said that JPMorgan has provided representation and warranty coverage for the loans originated by Sprout.

“These loans, along with the rest of the loans in the transaction, underwent a full scope due diligence review with satisfactory outcomes and meet the Sponsor’s Acquisition Guidelines,” KBRA analysts wrote. “In addition to the Sponsor has demonstrated extensive RMBS securitization performance history though this is mainly in relation to prime jumbo loans. This transaction represents the first securitization by the Sponsor backed by investor cash flow loans.”

The highest tranche received a AAA bond rating by KBRA, with a credit enhancement of 34.4%.

“Investor properties generally exhibit a higher propensity of default than owner-occupied properties. Their performance may depend on certain aspects of a property’s rental market (e.g., vacancy rates, market rent trends, regional prices), as well as the borrower’s capacity and motivation to manage multiple properties, generate sustainable cash flow and maximize recoveries,” KBRA analysts wrote. “Additionally, alternative doc types (e.g., DSCR) have historically exhibited higher delinquency and default risk relative to loans underwritten using traditional income qualification (i.e., 1-2 years of tax returns/W2s). These potential risks for JPMMT 2022 DSC1 are partially mitigated by the underlying pool’s moderate leverage ratios and relatively solid credit scores.”

In another presale report, analysts at S&P Global weighed whether there were any additional risks related to foreclosure and liquidation timelines for investor properties compared to owner-occupied properties.

“We considered the variance in foreclosure and liquidation timelines and determined that the delta of timelines between investor and non-investor properties did not pose an additional risk to the pool,” the analysts wrote.

Shellpoint Mortgage Servicing, a division of NewRez, and Nationstar (Mr. Cooper) are functioning as the primary servicer and master servicer, respectively.

The loan purpose for 478 loans (just over 50% of the pool balance) is a cash-out refinance, with an average cash-out amount of $148,308 (114 loans have cash-out amounts greater than $200,000).



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Many lenders are not getting a sense of déjà vu with the current mortgage industry downturn, according to mortgage advisory firm Stratmor Group.

“This one feels different,” a recent Stratmor report states, citing executives in the mortgage industry. 

This time around, the fast mortgage rate increase, the large origination volume decrease and margin compression could cause an “unprecedented amount of excess capacity, and many lenders will need to sell or simply won’t survive,” Jim Cameron, Stratmor’s senior partner of Stratmor, said. 

Of the top five monthly mortgage rate increases to occur since 1984, three took place during the first 10 months of 2022 — one in September (89 bps), April (81 bps) and October (79 bps). 

Meanwhile, forecast volume for 2022 is expected to drop by $2.18 trillion — the largest dollar volume drop in history. At 49%, this year’s forecasted decline would be the largest percentage decline in year over year volume since 1990, according to the Mortgage Bankers Association

In addition, more lenders are chasing fewer loans, and the speed and severity of this downturn has created revenue and margin compression on “steroids,” the report states. With 35-plus years of mortgage rates on a declining trend, rates bottomed out in 2020, limiting “the possibility of a major refinance boom bailing out the industry.” 

While 2021 was a record year for production volume at $4.4 trillion, the largest decrease in revenue occurred in 2021 in both retail, which dropped 68.8 bps, and wholesale, which declined 137 bps, followed by the first half of 2022, according to the MBA and Stratmor Peer Group Roundtables (PGR) program. 

That’s not to say there is no hope. Demographics, low delinquencies and healthier-than-normal household net worth are some of the factors that Stratmor believes will lead the downturn to be shorter than usual.

A large cohort of 28- to 38-year-olds in prime homebuying age will drive purchase business in the next three to five years, Cameron said, and historically low delinquency rates will mean more borrowers will be eligible for new purchase or refinance loans. 

Household net worth has also been on a rising trend since 2009. In addition, household financial obligation ratio, which is at 14.27, and debt service ratio, which is at 9.58, are much lower than historical averages, and are lower than when the U.S. economy entered the Great Recession of 2007 and 2008. 

“This is good news for lenders — as we emerge from this mortgage market downturn, borrowers and prospective borrowers will be in a better position to qualify for mortgages and to make their payments once they close their loans. While the recession risk looms large, at least households are in much better shape with respect to net worth, delinquencies and the ability to meet financial obligations,” the report notes. 

Non-bank lenders, particularly independent mortgage bankers (IMBs), are more likely to react quickly to shed staff during a downturn as compared with banks, the report adds. 

Warehouse lenders require non-banks to maintain compliance with profitability, capital and liquidity covenants. Non-banks also typically don’t have lines of business other than loan servicing to subsidize mortgage, which means that cutting costs and shedding capacity is a matter of survival — especially for those without a servicing portfolio. 

Since non-banks accounted for 63% of the entire market in 2021, up from 24% in 2010, and are “more likely to consolidate, this would argue for a shorter duration downturn,” the report states. 

“This may be the most painful downturn in mortgage banking history in terms of the severity of the downturn and the speed with which it occurred,” Cameron said.

But some bright spots in demographics, low delinquencies and healthier than normal household net worth “may help hasten us toward the day when we can return to “normal” with revenue rationalizing, capacity adjusted and a return to profits that are reasonable based on the risks of the business,” Cameron said.



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