Hello, LOs!
The incredible refi boom of 2020 sure was something, wasn't it? I mean, some LOs individually originated more than $1 billion in 2020, and that was largely because they rode the refi wave.
I've spoken to hundreds of LOs over the last eight months, and one thing that's always stuck out to me is how excited you guys get when you close a deal at 2.5% and save a client hundreds of dollars a month by refinancing their mortgage. Many of you know these folks from your local community – they coach a Little League team, you see them at the grocery store or Home Depot. They're neighbors.
So today, I'd like to talk about the borrowers you were not able to help in 2020. They didn't have 780 credit scores, a big salary or a lot of equity in their homes. Stricter lending standards in 2020 meant they still have mortgages with interest rates in the 4s or 5s, maybe struggled to make payments and/or even lost their job or had wages reduced. There are millions of them across the country.
The FHFA appears to be responding to criticism that those borrowers never had a chance.
The agency is pushing Fannie Mae and Freddie Mac to roll out a new refi product for low-income borrowers in the summer. The GSE program targets low-income borrowers who make 80% of the area AMI with balances of $300,000 or less. Under the new refi option, lenders must ensure that the borrower saves at least $50 a month in their mortgage payments while simultaneously dropping their interest rate by at least 50 bps. The FHFA will also require that lenders provide a maximum $500 credit for an appraisal if the borrower is not eligible for an appraisal waiver. The GSEs will reimburse the lender once the loan is sold to them.
Finally, the FHFA will also waive its controversial adverse market refinance fee for borrowers with loan balances at or below $300,000.
LOs, I'd like to hear from you: How many borrowers did you have to turn away in 2020 because they wouldn't meet your lender's credit standards? What do you think of the new program? Could there be unforeseen consequences? As always, I would love to hear your thoughts. Please email me anonymously at jkleimann@housingwire.com.
A few assorted items of note:
🎙️It's the season finale of Season 5 of Housing News! This week, Marlena learns that Jake has been having an affair with their au pair's neighbor's ghost, who has amnesia and was left for dead by Brad! Wait, wrong show. Sorry. HousingWire's Editor-in-Chief Sarah Wheeler interviews Patrick Burns, the CEO and co-founder of Spruce, a proptech company powering online real estate transactions. In this episode, the pair discuss heightened investor interest in title technology, innovation and fintech adoption spurred by COVID-19, as well as the rise of M&A and partnerships.
🏠 We've got a fantastic deep dive into the world of real estate agent commissions. Part one explained the history of sales commissions, and the labor market for real estate agents. Part two dove into legal challenges of the present commission system, and the industry's defense of commissions at the present level of 5% a home sale. Part three, which drops on Friday, assesses the future of real estate commissions and discount brokerages. Please give it a read!
🛠️ LoanDepot has another new homebuilder JV, this time with LGI, one of the fastest-growing homebuilders in the country. It's among the top 15 in terms of units built. They generally do move-up and entry-level in the Midwest, South and West.
💼 A little bit more about that Finance of America/Parkside Lending deal: Through its wholesale operation, Finance of America originated $4.3 billion in mortgages in 2020. And Parkside also originated about $4.3 billion in volume in the channel. Both grew massively in wholesale last year. Parkside's wholesale operation will be fully integrated into Finance of America's business. It won't be a standalone business; it will operate under Finance of America's name. A significant number of Parkside staffers will join.
OK, that's it for me. See you tomorrow!
James Kleimann
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