Fannie Mae: Housing sentiment continues upward trend

Good morning. This is Mortgage Nuggets, the newsletter that transforms mortgage news into an easily digestible email for you. Today's newsletter is 701 words, 3.5 minutes. Let’s dive in!

1. IMBs face losses as Fannie Mae and Freddie Mac demand loan repurchases

IMBs are grappling with a rising tide of loan-repurchase requests from Fannie Mae and Freddie Mac, posing a new challenge to their already strained balance sheets.

The surge is attributed to the large volume of low-rate loans originated during 2020 and 2021, which saw an increased rate of underwriting errors due to the industry's capacity constraints.

The concern is that the agencies are overly aggressive in pursuing repurchases for loans with minor underwriting defects. IMBs, especially smaller and mid-sized ones, face a dilemma as they have limited options for handling repurchased loans, given the current higher interest rates.

Most of these banks are unable to hold repurchased loans on their books and will likely have to sell them in the whole-loan market, potentially incurring substantial losses. The MBA is currently in discussions with the agencies regarding these concerns.

2. Credit availability at lowest level in 10 years

Mortgage credit availability in April dropped to its lowest point in 10 years, according to the Mortgage Bankers Association (MBA).

The MBA's Mortgage Credit Availability Index (MCAI) fell by 0.9% to 99.6, indicating tighter lending standards. The Conventional MCAI saw an increase of 0.5%, while the Government MCAI decreased by 2.1%.

Joel Kan, MBA's vice president, attributed the decline to reduced demand for certain loan programs and broader credit conditions. Kan also noted a supply decrease in government credit and cited the lack of for-sale inventory as a major obstacle to home purchase growth this year.

3. Q1 Earnings reports 📊

• loanDepot reported a net loss of $91.7 million, or 25 cents per diluted share, down 42% from Q4 2022. Revenue grew 22.5% to $207.9 million, but was down 59% from Q1 2022.

• Finance of America Companies (FOA) posted a $14.6 million profit in Q1 2023. It is now looking ahead to a more dominant position in the reverse mortgage space with its recent acquisition of AAG.

• Guild Mortgage delivered a $37.2 million net loss in Q1, higher than the $15 million loss in Q4 2022. The adjusted net loss came in at $2.5 million in Q1 2023.

• Rocket Companies, the parent of Rocket Mortgage, sustained a $111 million adjusted net income loss in Q1 2023, following a $197 million adjusted net income loss in Q4 2022.

4. More Nuggets

📈 Fannie Mae's Home Purchase Sentiment Index (HPSI) rose in April to its highest level since May 2022, driven by more optimistic consumer expectations on mortgage rates, despite ongoing concerns over housing affordability and the expectation of continued home price increases. (NMP)

💵 Newrez LLC, a national mortgage lending and servicing organization, said Monday it will now offer Freddie Mac BorrowSmart Access, a mortgage program designed to assist first-time homebuyers. (Newrez)

💼 National Mortgage Insurance has integrated with Vesta, a loan origination system provider, enabling lenders to instantly obtain real-time, risk-based mortgage insurance quotes through National MI's Rate GPS tool, without leaving the Vesta platform. (KXAN)

🔐 Rate-lock volumes declined more than 20% in April, even though mortgage rates trended lower during the month, according to Black Knight. Purchase locks fell 22%. Cash-out refinance locks fell 21%. Refinance locks down 28%. (Black Knight)

5. Metros where homes are selling the fastest

According to the April Housing Report from Realtor.com, homes are currently staying on the market for 17 days longer than last year, but still selling 12 days quicker compared to the average time between April 2017-2019, before the pandemic.

On average, in the 50 largest metros, homes for sale are sitting on the market for 41 days. The fastest-selling metros include;

• Rochester, NY (17 Days)

• Columbus, OH (24 Days)

• Hartford, CT (24 Days)

• Denver, CO (25 Days)

• Boston, MA (26 Days)

• San Jose, CA (27 Days)

• Virginia Beach, VA (30 Days)

• Seattle, WA (31 Days)

• Milwaukee, WI (31 Days)

• Nashville, TN (32 Days)

☀️ See you on Friday!

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