Mortgage insurance tax deduction may be restored

G.M. This is Mortgage Nuggets, the newsletter that delivers you a new edition, hot off the press, every Mon, Wed, and Fri

If it were still 1995, we’d be throwing it at your door from our bikes.

1. FHA OKs modifying mortgages to 40-year terms

The Federal Housing Administration (FHA) has increased the maximum term for a mortgage modification to 40 years from 30 years.

The change aims to help homeowners retain their homes after defaulting by allowing mortgagees to reduce the borrower's monthly payment further. The new rule will align the FHA with modifications available to borrowers with mortgages backed by Fannie Mae and Freddie Mac.

The change will take effect from May 8, 2023. The FHA expects the move will allow for more sustainable monthly payments, helping borrowers retain their homes after a default episode while mitigating losses to the FHA's Mutual Mortgage Insurance Fund.

2. Demand for home loans climbs

Despite rising mortgage rates, there was an increase in demand for home loans last week, particularly for adjustable-rate mortgages and government loans.

The MBA survey showed a 7.4% increase in the mortgage composite index, with the refinance index up 9.4% and the seasonally adjusted purchase index up 6.6%.

Adjustable-rate mortgages rose 13.9%, and government loans were up 13% last week, according to the MBA estimates. The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.

"Even with higher rates, there was an uptick in applications last week, but this was in comparison to two weeks of declines to very low levels, including a holiday week," said Joel Kan, MBA vice president.

One reason for the increase in demand is the recent surge in investor demand, as some borrowers realize that eventually, rates will drop, and it will go back to a seller's market where buyers will lose the negotiating power that they have now. Investors are entering the market now to secure a better deal while competition is low.

3. Guaranteed Rate one-day mortgage approval

Guaranteed Rate has expanded its Same Day Mortgage program nationwide, aiming to give a competitive edge to first-time buyers competing against all-cash buyers.

Borrowers who provide required documentation within eight business hours receive a $250 closing cost credit, and eligible loans with an appraisal waiver can receive a clear to close within hours of uploading required documents.

However, borrowers must upload all documents, including pay stubs, bank statements, and a copy of the purchase agreement, ruling out self-employed borrowers and co-borrowers. The program requires automated income and asset verification, and the property must be eligible for an appraisal waiver.

4. More Nuggets

⚠️ The CFPB has released a report on unlawful fees charged in deposit accounts and loan servicing markets, including among mortgage servicers, finding excessive late fees, unnecessary property inspection fees, and failure to waive fees for homeowners in loss mitigation options outlined under the CARES Act. (Report)

🔄 Impac Mortgage is shifting to a mortgage broker model, winding down its third-party origination channel, relinquishing its GSE Seller/Servicer designation, and reducing office expenses to better navigate current market and industry conditions. (NMP)

👨‍⚖️ The FTC has sued to block the $13 billion merger between ICE and Black Knight, arguing that the merger would stifle innovation, reduce lenders’ choices, and raise costs for homebuyers, while the companies remain confident in their position and look forward to presenting it in court. (Bloomberg)

5. loanDepot reports another big loss in Q4

LoanDepot, a California-based mortgage lender, reported a third consecutive quarterly loss in Q4 2022 due to declining mortgage production despite its decision to exit the wholesale channel, cut its workforce and invest in new products.

The company made a net loss of $610.4M in 2022, compared to a profit of $555.5m in 2021. Loan origination in 2022 came in at $53.7bn, down from $137bn in 2021. The company plans to continue to reduce costs and improve its operations in 2023.

☀️ See you on Monday!

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Good times.

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