FGMC's rough week, FHFA's new fee goes into effect and more top stories you might've missed
July 6, 2022 9:49 AM
First Guaranty files for bankruptcy
Days before the bankruptcy announcement, the lender laid off more than 75% of its workforce due to significant losses in mortgage revenues. First Guaranty Mortgage Corp and its affiliate Maverick II Holdings LLC submitted their filing as it explores restructuring options. It is finalizing debtor-in-possession financing, allowing it to close and fund approved customer loans under existing terms. In addition, five former employees have filed a class action lawsuit complaining the company failed to provide adequate notice of layoff according to the WARN Act. A separate suit filed against First Guaranty alleges that the lender engaged in discriminatory behavior towards women.
Read the full story here.
Andrew Harrer/Bloomberg
FHFA implements fee but may revisit capital framework that includes it
Trade groups have expressed concern that the fee that's intended to address counterparty risk undermines uniform mortgage-backed securities, which is meant to minimize differences between the two government-sponsored enterprises. A statement last week from the Federal Housing Finance Agency raised the question of whether it would consider another revision to the capital framework to resolve the issue. The fee is not expected to hurt the market right now, but as the Fed unwinds, its involvement could become more of an issue as investors could pay less for UMBS due to the loss of the fungibility advantage.
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Freddie Mac automating rent-based underwriting for single-family loans
The agency will make it possible to submit loans for underwritings based on 12 months of on-time rental payments. The initiative builds on a previous Freddie Mac program that facilitates the collection of rent records from tenants who work with the GSE’s multifamily borrowers. Fannie Mae launched a similar project last year. This initiative is aimed at expanding homeownership to first-time buyers and narrowing the racial homeownership gap.
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House prices are rising faster in disaster-prone areas
Homebuyers are not deterred from purchasing in areas where natural disasters are increasingly probable, according to a recent report from Home Bay. Median sales increased 167% in the three states with the most federally-declared disasters since 2012: California, Oregon and Washington. Home buyers see climate change as a long-term issue and not one they have to deal with right now, analysts said. For mortgage lenders and servicers, increased home values also up the financial risk related to natural disasters since delinquencies rise for months afterward.
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Five ways the CFPB could rein in Facebook
Rohit Chopra is laying the groundwork for expanding oversight on Facebook and other Big Tech companies on how they collect and sell consumer data. The CFPB is likely to focus on Facebook's ad-driven business model of collecting and selling consumer data. The CFBP could also oversee Facebook’s “black box” algorithm; last week, Meta settled a lawsuit in which the Justice Department alleged discrimination in violation of the Fair Housing Act.
Read the rest of the ways CFBP could use its authority against Facebook here.
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U.S. home-price growth decelerates for first time since 2021
A national measure of prices dropped slightly to 20.4% from 20.6% year-over-year gains in March. The figures show an initial but inconsistent sign that price growth is starting to slow, especially given that the run-up in rates is already squeezing buyers out of the market.
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Ting Shen/Bloomberg
States can play hardball with credit reporting bureaus, CFPB says
The Consumer Financial Protection Bureau said states have the flexibility to pass laws invoking consumer reporting that go beyond what federal regulations require, which might affect their local economies and citizens. For example, states can require credit report bureaus to provide material in a language other than English. States can also ask companies to leave “medical debt, evictions, arrest records” off a credit report, as such forms of debt do not reflect credit history and have harmed consumers. The move contrasted with comments by the Office of Comptroller of the Currency, which some states claimed tied their hands when trying to pass any restrictive lending laws for banks in 2008.
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Lower housing costs — not jobs — are driving intercity moves
Overall relocation is at a 73-year low, as only 8.4% of the population moved last year. Housing-related issues have been the leading factor driving short-distance moves, but this year it is also the main reason for a long-distance relocation, thanks to remote work options. The highest increase in prices comes from metro areas with the highest levels of migration.
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Same-sex couples pay a premium to live in more liberal states
Homeowners in the top ten states with the highest share of same-sex couples pay an average of $116,730 more on housing than in the ten states with the lowest percentage of LGBTQ+ households, according to a new LendingTree report. About a third of same-sex homebuyers say they moved to live in a more welcoming region. More data to better reach LGBTQ+ homebuyers is expected to become available as more members of Gen Z, which 15% identifies as LGBTQ+, start participating in the home buying process.
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Small Business Administration, Daniel Acker/Bloomberg News
Black entrepreneurs aim to narrow the racial wealth gap with mortgage fintech
Ashley D. Bell is the founder and CREO of Ready Life, and he has partnered with Bernice A. King, the youngest daughter of Martin Luther King Jr., as chair of the new fintech advisory council. The new company will help customers show lenders that they have the cash flow required even without the necessary credit score to secure a mortgage. Bell is taking a marketing-forward approach to reach mainly potential Black buyers who feel cheated by the system.
Read the full story here.
Refinance apps are 80% below their 2021 level
Still, refinance application volumes last week increased 0.7% from the week before on a seasonally adjusted basis. The Refinance Index went up 2% from the prior week due to interest rate moderation. Fannie Mae reported the dollar volume of activity is still down compared to the year before. Purchase applications were flat last week, and the average loan size fell 5.8%.
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Mortgage servicer says prior data breach hit 100,000 more users
Lakeview Loan Servicing disclosed additional users affected by its data breach last fall. The total number of customers impacted is 2,639,057, according to a filing with the Office of Maine Attorney General. The servicer faces a class action lawsuit in the Southern District of Florida U.S. District Court from clients alleging Lakeview failed to protect personally identifiable information.
Read the full story here .
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Roostify, Indecomm team up to streamline income verification
The partnership integrates Indecomm’s IcomeGenius, an automated income calculation tool, within Roostify's framework. Upon upload of bank statements, Indecomm analyzes the data with its machine-learning algorithms and generates a worksheet adhering to guidelines set by Fannie Mae and Freddie Mac; it then sends it back to Roostify. The agreement is meant to ease asset verification for self-employed borrowers and gig economy workers.
Read the full story here.
Flagstar Bank sued over its latest massive data breach
Three separate lawsuits were filed over the past two weeks in the Eastern District of Michigan United States District Court after the bank revealed a two-day cyberattack in December. The lawsuits take issue with the company’s failure to disclose how the breach occurred or who was responsible, even six months after. In addition, the bank was a victim of a similar massive attack in 2020, which plaintiffs are pointing to as proof of the bank’s “failure to learn” and “institutional disregard for consumer data protection.”
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Loan mods more than doubled in Q1, narrowing gap with deferrals
The rise of loan modifications at government-sponsored enterprises Fannie Mae and Freddie Mac is in line with expectations that borrowers with later exits from pandemic-related forbearance would likely have lingering hardships. The number of modifications designed to lower payments for borrowers with long-term reductions in income is closer to rivaling deferrals used by homeowners who can afford regular payments. While workout options have helped distressed borrowers stay in their homes, foreclosure starts have tripled in the first quarter of 2021.
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