FHFA hits pause on planned fee hike

Good morning. This is Mortgage Nuggets; we make sure you’re ready when you walk out of the tunnel for game day. Which in this industry, is every damn day.

1. Latest housing starts data is looking good

According to government data released Thursday, home construction in February increased for the first time in six months, with residential starts rising 9.8% to a 1.45 million annualized rate.

Applications to build grew 13.8% to an annualized pace of 1.52 million units, reflecting gains in permits for both single-family and multifamily projects.

• The uptick points to signs of budding optimism that the housing slump may be approaching its end. Homebuilder confidence has risen for three consecutive months, after 12 successive drops last year. Additionally, supply chains are stabilizing and home purchase applications are on the rise.

Home completions also surged, with the number of homes completed rising more than 12% to a 1.56 million pace, the fastest since 2007 and led by a jump in multifamily projects.

This increase in supply is good for mortgage rates because it helps combat inflation in the long term by increasing supply. While destroying demand may provide short-term relief, addressing supply shortages is a more effective and natural economic approach.

2. FHFA hits pause on planned fee hike

The FHFA on Wednesday announced that it would delay the implementation of new LLPA fees on higher DTIs by three months.

• Specifically, higher fees charged for mortgages with debt-to-income ratios above 40% will instead become effective Aug. 1, with no post-purchase adjustments applied through Dec. 31, 2023.

The delay is a partial win for the industry as it gives lenders more time to address the operational and compliance challenges of implementing a DTI-based LLPA. More importantly, it provides the industry with more time to convince the FHFA to abandon this policy altogether.

In response to the FHFA's statement, the president of the Mortgage Bankers Association (MBA) stated, "While we appreciate the delay, we are disappointed that the FHFA did not acknowledge the need to consider alternative approaches to DTI-based pricing adjustments."

Trade groups and lenders are currently lobbying for an alternative solution that would eliminate DTI-based LLPA completely.

3. Odds of no hike at the next Fed meeting

Amid the ongoing banking crisis, the market increasingly anticipates the Fed to pause rate hikes. Fed Funds futures market data indicates a greater than 50% chance of no change in the key monetary policy rate on March 22.

Prior to the collapse of Silicon Valley Bank and Signature Bank, a half-point hike was expected next week to tackle high inflation. Investors, however, still assign roughly 50% odds for a quarter-point hike in May.

As the Fed's rate decisions significantly impact financial markets, a shift from hiking to holding steady would be a major development.

A MESSAGE FROM TENDIES RESEARCH

Get access to the research banks and hedge funds use to make decisions. For free.

Tendies research coverage spans across commodities, economics, and equities, with special reports providing deeper analysis on the topics that matter most.

Brought to you by a team of former industry professionals from Bloomberg, UBS, Morgan Stanley, and others.

See for yourself

4. SVB resumes mortgage services

Silicon Valley Bank (SVB) resumed its mortgage origination services via its newly established "bridge bank" just four days after California state regulators took control of the institution and appointed the FDIC as receivers.

Tim Mayopoulos, the former CEO of Fannie Mae and Blend, has been appointed as the new CEO of SVB. The bank specializes in banking for tech startups and focuses on jumbo loans (greater than $726,200).

In the last 12 months, 76.6% of SVB’s production was conventional loans, and 49% consisted of purchase loans. The company’s average mortgage loan was about $1.45 million, and the vast majority of its origination volume is in California. The company has 30 active loan officers and 20 branches, according to Modex.

5. More Nuggets

👐 According to Redfin, almost half of home sellers are making concessions, such as money towards repairs and mortgage-rate buydowns, to attract buyers, with a record 13% of home sales including a price cut and a final sale price below the list price. (Full Report)

🥪 ION: Americans’ favorite lunch is a ‘heart bomb’ of salt, preservatives, and sugar. But doctors say there’s a way to build a healthier sandwich—here’s how.

💸 $30 billion financial aid for the First Republic Bank led by JPMorgan Chase and Morgan Stanley sparked a broad market rebound, momentarily alleviating investor fears of a banking crisis amidst rising interest rates and global inflationary pressures. (Axios)

☀️ Thanks for reading; see you on Monday!

p.s. OddIy Terrifying

Was this email forwarded to you? Subscribe here!

Please forward this to your friends and colleagues if you found it valuable. Written by Ian M.