Fulfilling a campaign promise by Governor Phil Murphy, a recent bill (S885) introduced by state Sens. Richard Codey and Nia Gill seeks to create a state-run financial institution to host state deposits, make loans, and purchase mortgages from commercial banks under the guidance of a 13-member board of directors. The state bank would also fund transportation project loans, small business loans, student loans and have the power of eminent domain. Critics say local community banks already provide these services and reinvest this money back into local communities, who in the end will suffer. There is currently only one other state-run bank in the United States, located in North Dakota.
For the first time since Q1 2017, a composite outlook of bank CEOs, presidents, and CFOs from across the United States suggests that there is more optimism about the banking industry, as well as overall economic conditions.
This according to Promontory Interfinancial Network's proprietary Bank Confidence Index (SM), which is back in positive territory with a 2.4-point improvement (to 50.5, crossing from contractionary to expansionary territory) over last quarter. This is the highest rating for the Bank Confidence Index since Q2 of 2016.
The Bank Confidence Index, which is calculated using the results of Promontory Interfinancial Network's Bank Executive Business Outlook Survey, tracks banker expectations in four key areas: access to capital, loan demand, funding costs, and deposit competition. (Charted on a scale of 0-100, a score over 50 can be read as expansionary.) The Q4 2017 survey is the twelfth published by Promontory Interfinancial Network with data released every fiscal quarter.
Confidence in housing made a near-record return in November in the Fannie Mae Home Purchase Sentiment Index® (HPSI), derived from Fannie's National Housing Survey® (NHS). The HPSI overall posted 87.8 in November, 2.6 percentage points higher than the month prior. The Index hit all-time highs in February of this year, and again in June and September.
"In November, the HPSI rebounded to near its all-time high, returning the Index to its gradual upward trend and suggesting fairly stable consumer home-buying attitudes,” says Doug Duncan, chief economist and senior vice president at Fannie Mae. "These results are consistent with our expectation that the housing market will continue its modest expansion going forward."
The share of homebuyers surveyed for the Index who believe now is a good time to buy rose seven percentage points to 29 percent, while the share of sellers who believe now is a good time to sell rose four percentage points to 34 percent. The share of those surveyed who believe home prices will go up rose six percentage points to 46 percent.
The Federal Reserve acted as expected on Wednesday, increasing the key interest rate one-quarter percentage point for the third time this year. The action concludes a hastened 12 months for the policymaker, which raised the rate in March and June, as well as once in 2016 and once in 2015. It forecasts three rate raises in 2018.
"Hurricane-related disruptions and rebuilding have affected economic activity, employment, and inflation in recent months but have not materially altered the outlook for the national economy," according to a statement by the Fed. "Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12‑month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely."
The maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac will increase to $453,100 for most markets in 2018, the Federal Housing Finance Agency (FHFA) recently announced. The increase in the baseline loan limit, mandated by the Housing and Economic Recovery Act (HERA), is in response to rising values.
The maximum loan limit will be higher in high-priced markets were 115 percent of the median home value exceeds the baseline loan limit; the ceiling on that limit is 150 percent of the baseline loan limit. That ceiling, according to the FHFA, will increase to $679,650 for one-unit properties in high-priced markets, with the potential for even higher limits in Alaska, Guam, Hawaii and the U.S. Virgin Islands.
More information can be found here.
Banker confidence in primary performance indicators for the industry continues to skew slightly negative according to results from our Q3 2017 Bank Executive Business Outlook Survey. This quarter’s survey further shows changes to the Banker Confidence IndexSM, now at 48.1, a half-point improvement from last quarter (47.6). While bankers’ outlook for the future may be improving, the Index nevertheless falls below the key threshold of 50 for the second quarter in a row, a first since the survey’s inception 11 quarters ago. (Charted on a scale of 0-100, a score over 50 can be read as expansionary. A result below 50 can be read as contractionary.)
This cautionary outlook is a consistent theme throughout the survey and may represent ongoing frustration with political events in Washington, DC, or a fear that the spate of recent economic news may indicate a highpoint. On the other hand, it may be that bankers do not believe that economic conditions are as strong in their industry as in other sectors of the economy. Fewer than half (49.1%) of respondents saw economic conditions improve for their institutions over the past year. And even fewer (44.7%) expect to see improvements over the next 12 months.
The risk of fraud in mortgage applications increased 16.9 percent in the second quarter compared to the second quarter of 2016, according to CoreLogic’s latest Mortgage Fraud Report.
The analysis found that during the second quarter of 2017, an estimated 13,404 mortgage applications, or 0.82 percent of all mortgage applications, contained indications of fraud, as compared with the reported 12,718, or 0.70 percent in the second quarter of 2016. The CoreLogic Mortgage Fraud Report analyzes the collective level of loan application fraud risk the mortgage industry is experiencing each quarter.
The report says that the continued shift to a purchase market is a key factor in the rise in application fraud risk due to stronger motivations and increased opportunities to commit mortgage origination fraud. A second factor leading to the fraud risk was a 48 percent increase in the share of loans originated through wholesale channels, the report found. According to CoreLogic, wholesale applications have shown a higher risk level than retail channels.
“This past year we saw a relatively large increase in the CoreLogic National Mortgage Application Fraud Index,” said Bridget Berg, principal, Fraud Solutions for CoreLogic. “If the factors that influenced the increase continue, including a shift to purchase transactions and growing wholesale channel origination activity, it is likely that mortgage application fraud risk will continue to rise as well. Fraud on cash-out refinance transactions and home equity loans may become more of a factor in the coming years as home values and equity rise.”
Today, digital technology is driving more of the loan transaction away from paper to online. The industry is realizing that it’s time to get the paper out of our systems and manual processes. Paper documents take more time to process, require more people to validate, and key information from and follow-up efforts to track down missing pages, signatures, or total file loss.
For example, delivering a correct closing disclosure (CD) to the borrower three days before closing highlights just how difficult it is to get everything right and on time in a paper world.
Ensuring proof of compliance on confirming something like receipt of delivery is next to impossible in a paper world. Taking the mortgage process fully electronic will be the only way to ultimately ensure a totally verifiable, auditable compliant process.
Beyond the improvements gained by eliminating the paper process, digital collaboration during the loan transaction promises a better consumer experience from the start. For lenders, the increase in operational efficiencies and consistency are measurable. Overall, a digital process ensures greater data and document integrity, compliance and control.
Digitizing the mortgage process has the potential to greatly improve both productivity and the customer experience. Lenders who incorporate a digital workflow gain efficiency, better satisfy borrower expectations for collaboration and communication, and ultimately capture more market share.
First-time home buyers are shying away from their plans to purchase this spring, according to a recently released report by realtor.com®, due to the surge in mortgage rates in the last two months of 2016. Though rates have deflated since the end of the year, they remain hovering above 4 percent—high enough to scare off first-timers this spring, now down to 44 percent from 55 percent in October.
"The rise in rates is associated with an anticipation of stronger economic and wage growth, both of which favor buyers," says Jonathan Smoke, chief economist for realtor.com. "At the same time, higher rates make qualifying for a mortgage and finding affordable inventory more challenging. The decline in the share of first-time buyers since October suggests that the move-up in rates is discouraging new homebuyers already."
Housing markets in the U.S. overall continue to progress, supporting the best year in homes sales in a decade, as indicated by Freddie Mac’s Multi-Indicator Market Index® (MiMi®) value, which stands at 86—a market on the “outer edge of its historic benchmark range of housing activity.” The MiMi value, which has climbed back up 45 percent since its all-time low in 2010, is still trailing its high of 121.7.
“The National MiMi stands at 86, a 5.6 percent year-over-year increase, but still below its historic benchmark normalized to 100,” says Len Kiefer, Freddie Mac deputy chief economist. “The purchase applications indicator is up nearly 19 percent from last year, indicating strong housing demand and a market that’s poised to close out the best year in home sales in a decade.
“National home prices have surpassed their pre-recession nominal peak with about half of states still below their pre-recession peak,” Kiefer continues. “Factoring in low mortgage rates and modest income gains, house prices still have some room to run, as indicated by the MiMi payment-to-income indicator which is nearly 33 percent below its historic benchmark.”