Mortgage rates ease from highs, applications drop

Plus: Americans' homes are worth more than ever, but tapping into that value isn't easy.

September 08, 2023

🌅 Happy Friday. Hope you have a lovely, languorous weekend ahead. Today’s newsletter is ~780 words, a 3.5-minute read. Let’s dive in…

Disclaimer: Average mortgage rates as of Sep 7, 2023. © MND's Daily Rate Index.

1. UWM chief urges FHFA to step in on GSE loan buyback issue

Mat Ishbia, CEO of United Wholesale Mortgage, has criticized the surge in loan buybacks from Fannie Mae and Freddie Mac, stating it's becoming "a big issue" and that the Federal Housing Finance Agency (FHFA) “is going to have to step in again.”

Ishbia emphasized the industry's frustration, noting, “They are making billions, and lenders are barely scraping by," and added, “The industry is up in arms... with the amount of repurchases Fannie Mae and particularly Freddie Mac are pushing back on lenders.”

A recent report indicates that loan-repurchase rates are rising, with Fannie Mae's repurchase rate surging from eight basis-points in 2020 to 68 basis-points in Q1 2023.

2. Catch up quick

🏢 There’s a housing shortage and an office glut. So why are there only 217 U.S. office-to-resi conversion projects in the pipeline? (Fortune)

💸 Americans' homes are worth more than ever, but tapping into that value isn't easy. (Axios)

⚖️ How the buyer commission lawsuits could upend the relationship between agents and LOs. (HW)

🚁 ION: You can fly this new helicopter with your driver’s license and just 30 hours of training. (Robb Report)

3. FHA issues waiver to make government-insured mortgages more accessible

The Federal Housing Administration (FHA) has waived a requirement for FHA-approved lenders to flag rejected loans in the FHA Connection (FHAC) system.

The FHA stated, “FHA has determined that this flag does not improve risk management and is often why other lenders will reject an applicant even when that applicant might otherwise qualify for a loan.”

  • Previously, a warning flag was associated with a borrower and their case number for six months after a mortgage rejection, necessitating a review for any subsequent loan applications from other lenders.

The FHA commented, “By waiving this provision... FHA will no longer require lenders to enter rejection information in FHAC, streamlining the loan underwriting process and removing an unnecessary barrier for borrowers.”

This change is effective from September 11, 2023.

4. Mortgage rates ease from highs, falling for second week

Mortgage rates decreased for the second week in a row. The average for a 30-year, fixed loan fell to 7.12% from 7.18% a week earlier, Freddie Mac said in a statement yesterday.

Mortgage rates have been above 7% for the past four weeks and have more than doubled since the start of 2022. The surge in borrowing costs has stifled home sales and sidelined many buyers, squeezing affordability.

“While inflation has decelerated, firmer economic data have put upward pressure on mortgage rates which, in the face of affordability challenges, are straining potential homebuyers,” said Sam Khater, Freddie Mac’s chief economist.

Higher rates have weighed on demand, sending a gauge of applications for home-purchase loans to a 28-year low last week, according to the Mortgage Bankers Association.

5. Apartment construction is soaring

New apartment construction is on track to top a 50-year high, with nearly 461,000 units expected to be built across the U.S. this year, according to a new report. Below is a list of metro areas with the most new apartment units to be constructed in 2023.

6. Barclays; ‘Blame the Boomers’ for surging house prices

A momentary dip in US house prices last year has been overshadowed by their robust resilience, even as the Federal Reserve increased interest rates rapidly and mortgage rates climbed past 7%.

While some credit this to the 'lock-in' effect, where homeowners avoid selling due to high mortgage costs, a Barclays Plc research titled “Blame the Boomers” attributes it to aging Americans driving up home demand. Below is a summary of the note.

Though logic may suggest an older population would reduce housing demand, many baby boomers are currently retiring and forming households without releasing their existing properties. This phenomenon, described by household formation and headship rates, illustrates how shifts in population age can influence housing demands.

As individuals progress through life stages, from college to starting families to retirement, their housing needs change, influencing demand. The current demographic has 16.5% of the US population aged 65 or older, up from 13% in 2010.

Despite slower overall population growth, the prevalent demand from baby boomers is creating a supply shortage. Barclays predicts this supply-demand gap will continue, resulting in even higher home prices. Encouragingly, the elevated prices seem to be spurring new house construction.

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