NAR says listing brokers can offer 0%

Plus: Fannie Mae to increase LTV ratios

October 06, 2023

Good morning and Happy Friday! This is Mortgage Nuggets, your mortgage news tour guide. Keeping you updated every Mon, Wed & Fri. Let’s do this!

  • Calendar note: I’ll be off on Monday in observance of Indigenous Peoples Day — and back in your inbox on Wednesday.

Disclaimer: Average mortgage rates as of Oct 5, 2023. © MND's Daily Rate Index.

1. Fannie Mae to increase LTV ratios

Fannie Mae unveiled modifications to its Desktop Underwriter (DU) system, set for rollout on Nov. 18.

Key change: the maximum allowable LTV, CLTV, and HCLTV ratios for two- to four-unit, principal residence, purchase, and limited cash-out transactions will be updated to 95%.

This change will not apply to high-balance mortgage loans and loans that are manually underwritten. Current LTVs are 85% for two-unit properties and 75% for three- or four-unit properties.

Other key takeaways from the announcement:

  • The maximum LTV ratio for a single-unit home with a fixed-rate mortgage remains unchanged at 97%.

  • The DU system will now be able to identify HomeStyle Energy loan casefiles using the “Mortgage loan will finance energy-related improvements” indicator as long as the loan is “also a HomeStyle Renovation loan”.

2. NAR says listing brokers can offer 0%

The National Association of Realtors (NAR) now allows listing brokers to offer zero compensation to buyer brokers on its platform, a shift ahead of a class-action trial challenging the previous requirement of offering some compensation.

This change comes ahead of a class-action trial set for October 16, challenging the previous requirement of offering some compensation.

The trial, centered around allegations that the old compensation requirement inflated seller costs in violation of antitrust laws, could significantly impact real estate transaction costs and NAR's legal liabilities, especially if the court finds the previous compensation requirement to be in violation of antitrust laws.

3. Catch up quick

✍️ Behind the Surge: The Economic factors pushing mortgage rates toward 8%. (WSJ)

🧮 FICO announced that Movement Mortgage has become an early adopter of FICO Score 10 T to analyze their non-conforming loans. (Screener)

📊 Coming up: The govt. will release the jobs report for September today, get updates here

✈️ In other news: Airlines obsess about reducing fuel consumption by constantly finding new ways to reduce aircraft weight. They may have new allies in Ozempic. (Bloomberg)

4. Mortgage applications hit lowest since 1996

Mortgage applications took a significant dip, declining 6% last week, according to the Mortgage Bankers Association.

Delving into the specifics;

  • The Refinance Index dropped 7% week-over-week and has decreased by 11% compared to the same period a year ago.

  • Similarly, the seasonally adjusted Purchase Index was down by 6% from the previous week, while its unadjusted counterpart also marked a 6% decline.

“The purchase market slowed to the lowest level of activity since 1995, as the rapid rise in rates pushed an increasing number of potential homebuyers out of the market. ARM loan applications picked up over the week, and the ARM share increased to 8%, as some borrowers searched for ways to lower their payments”

Joel Kan, MBA's deputy chief economist

5. Homeowners turn to ‘last resort’ insurers

As traditional home insurance providers pull back from disaster-prone areas, homeowners are turning to state-sponsored "last resort" insurance plans. These plans, intended as short-term safety nets, are becoming primary solutions. 

For instance, Florida's Citizens Property Insurance, a last-resort plan, has become the largest home insurer in the state with 1.4 million policies.

Other states are witnessing similar trends. California and Louisiana have seen the number of policyholders for their respective last-resort plans double in the past five years. The California Fair Access to Insurance Requirements Plan notably added a record 25,000 policyholders in August. This is in stark contrast to the 7,000/month new policies cap recently imposed by Farmers Insurance in the state.

“These plans were really only supposed to be a ‘break glass in emergency’ type of a product,” said Douglas Heller, director of insurance at the Consumer Federation of America told the Journal. “Now that the insurance industry is walking away from communities, we’d better have a much more robust and healthy public backstop.”

☀️ See you on Wednesday!

1 fun thing: You need to explain to a 5-year-old what a loan officer does. What would you say? Tap reply. The clearest explanation may find its way into the newsletter.

What'd you think of today's edition?

Login or Subscribe to participate in polls.

If you like this newsletter, your friends may too. Forward it to a friend, and let them know they can subscribe here.