Fannie Mae issues fraud alert for lenders in Northern CA

Good morning. Today is the last day of the first half of 2023. How are those New Year’s resolutions holding up? — We’ve got a lot for you today; let's dive in.

1. Powell signals two or more Fed interest-rate hikes

Federal Reserve Chair Jerome Powell had a busy day Wednesday, speaking at both Sintra in Portugal, and at a conference in Madrid at the Bank of Spain. His message was clear — at least two more interest-rate hikes would likely be necessary this year to bring inflation down to the target level.

• “It may be that we don’t move for a meeting and then move at a meeting. We haven’t taken consecutive moves off the table,” he said, adding that the US wouldn’t be returning to pre-pandemic rate levels for a “good while.”

2. Largest banks weathered hypothetical $541B hit, Fed says

The nation’s largest banks weathered a hypothetical stress test scenario that consisted of $541 billion in projected losses, the Federal Reserve said Wednesday.

All 23 of the banks remained above their minimum capital requirements under this year’s exam, which featured a severe downturn in real estate markets, the Fed said. The exam tested banks against a 40% decline in commercial real estate prices, a substantial increase in office vacancies and a 38% drop in housing value, the Fed said.

The results demonstrate that large banks are well positioned to lend to households and businesses even during a severe recession, the central bank said.

3. FHA to require lenders to ask for language preference

The Federal Housing Administration (FHA) announced Tuesday that it will require lenders making FHA-insured mortgage loans to ask borrowers for their language preference.

Lenders will use the Fannie Mae/ Freddie Mac Supplementary Consumer Information Form (SCIF) to collect a mortgage applicant’s language preference. Using the form will enable lenders to make information available in the languages that borrowers will understand best.

Earlier this month, FHA also launched its new language access web page, which provides translations of key FHA mortgage documents in the top five languages most commonly spoken by borrowers with limited English proficiency.

4. Fannie Mae issues fraud alert for lenders in Northern CA

Fannie Mae has issued a mortgage fraud alert for lenders in northern California, warning of heightened instances of misrepresented child support income. The GSE highlighted four hallmarks of such a scheme.

• Commonality of real estate agents involved in selling the subject properties

• Bank statements and canceled checks are created to support falsified child support income

• Borrowers have no other source of income

• Child and spousal support documentation provided in the loan files do not match public records regarding those same persons; altered court documentation with case numbers that begin with “HF” (State of California court case numbers do not begin with “HF”)

Borrowers engaging in such a scheme would typically not qualify for a loan without including the misrepresented income, Fannie Mae said.

5. More Nuggets

Zillow is shutting down its closing services unit, the company confirmed. As a result, the company is cutting 80 positions. All impacted employees will receive eight weeks of pay, plus one additional week of pay for each year of completed service. LINK

Mortgage rates moved slightly upwards this week, breaking a three-week streak of declines, according to Freddie Mac. The average for a 30-year, fixed loan rose from 6.67% last week to 6.71%. LINK

Fannie Mae has released a frequently asked questions document related to RefiNow, clarifying aspects like transferability across servicers, differences from the HomeReady mortgage, usage of credit reports for determining payment history, and the role of a Desktop Underwriter in risk assessment of a RefiNow loan. LINK

Compass CEO: The pandemic craze will return once mortgage rates hit 5%. LINK

NAR and its president accused of racial, sexual discrimination. The suit claims NAR fired a Black employee after she broke off a relationship with then president-elect Kenny Parcell. NAR said it rejects the claims. LINK

Chase Home Lending announced the expansion of its $5,000 Homebuyer Grant Program to include additional Hispanic and Black communities in 16 markets. Find the new 16 here. LINK

In Other News, Diet Coke: World Health Organization to declare aspartame, the sweetener in Diet Coke, a possible carcinogen. A carcinogen is a substance, organism or agent capable of causing cancer. LINK

6. Mortgage applications rise for third week

Total mortgage application volume rose 3% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made for the Juneteenth holiday.

• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased from 6.73% to 6.75%.

• Applications to refinance a home loan rose 3% for the week but were 32% lower than the same week one year ago.

• Applications for a mortgage to purchase a home also climbed 3% for the week and were 21% lower year over year.

“New home sales have been driving purchase activity in recent months as buyers look for options beyond the existing-home market,” said Joel Kan, MBA’s vice president.

☀️ See you on Wednesday - July 5th!

1 fun thing: Looking for something new to stream over the weekend? Find some gems here.

Thanks for reading! Was this email forwarded to you? Subscribe here.