Category: Financing

LendingTree: Pool of mortgage borrowers receiving interest rates under 5% is shrinking

84.2% of borrowers received mortgages under 5%

LendingTree’s latest Mortgage Rate Competition Index revealed that borrowers with interest rates under 5% slid further for the week ending Feb. 17, 2019.

The report states that for 30-year fixed-rate mortgages, 84.2% of purchase borrowers received offers with interest rates under 5%, falling from 87.8% last week. Notably, this is a decrease from 2018’s rate when 88.2% of purchase offers were under 5%.

The report also highlights that across all 30-year, fixed-rate mortgage purchase applications made on LendingTree’s website, 21.2% of borrowers were offered an interest rate of 4.625%, making it the most common interest rate.

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MBA: Mortgage applications decline as economic uncertainty grows

Applications for 30-year fixed rate mortgages fall 3.7%

Mortgage applications fell even further for the week ending Feb. 8, 2019, according to the newest data from the Mortgage Bankers Association’s weekly Mortgage Applications Survey.

“Application activity fell last week – even with rates decreasing – as renewed uncertainty about the domestic and global economy likely held potential homebuyers off the market,” MBA Vice President of Economic and Industry Forecasting Joel Kan said. “Despite the recent decline in applications, we still expect that the continued strength of the job market and lower rates will support more purchase activity in the coming months.”

On an unadjusted basis, the Market Composite index retreated 3.7% from the previous week.

“The 30-year fixed-rate mortgage dropped to its lowest level since last March and was 52 basis points lower than its recent high last November,” Kan continued. “Government refinances provided a bright spark, picking up over 10%, as both FHA and VA refinancing activity saw increases over the week.”

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Fannie Mae: Tech companies threaten to edge banks out of the mortgage market

“Now is the time for banks to step up their digital game”

In the era of the digital mortgage, banks are facing increased competition from big tech companies looking to flex their muscles in the financial services realm, and they may need to invest more deeply in tech to stay on top.

According to a Fannie Mae’s Perspectives blog post authored by Steve Deggendorf, director of Market Insights Research, banks need to “step up their digital game” and figure out how to streamline financial tasks to enhance the customer experience before big tech beats them to it.

Citing data from Fannie Mae’s National Housing Survey from the third quarter of 2018, Deggendorf said more consumers have expressed a willingness to trust their favorite tech firm with their financial needs, including obtaining a mortgage.

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MBA: Mortgage applications fall 2.7%

Refinance Index also retreats 5%

Mortgage applications moderately fell for the week ending Jan. 18, 2019, according to the newest data from the Mortgage Bankers Association’s weekly Mortgage Applications Survey.

MBA Vice President of Economic and Industry Forecasting Joel Kan said mortgage application activity cooled off last week after two consecutive weeks of sizable increases.

On an unadjusted basis, the Market Composite index retreated 2.7% from the previous week.

“Both purchase and refinance applications saw declines but remained at healthy levels, with the purchase index remaining close to a nine-year high, and the refinance index hovering near its highest level since last spring,” Kan continued. “Reversing the recent downward trend, borrowers saw increasing rates for most loan types last week, as better-than-expected unemployment claims, easing trade tensions and stabilization in the equity markets ultimately led to a rise in Treasury rates.”

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Despite Fears of Overbuilding, Lenders Remain Willing to Fund Multifamily Development

Apartment developers are paying more interest on their construction loans—but that isn’t keeping developers from planning and financing new projects.

Despite rising interest rates and the nagging anxiety that developers are already building too many apartments in some markets, banks remain active lenders for multifamily construction projects.

“There is certainly no shortage of capital,” says Danny Kaufman, managing director in the Chicago office of HFF.

Interest rates rise

Apartment developers are paying more interest on their construction loans—but that isn’t keeping developers from planning and financing new projects.

“People have been predicting rates rising for 10 years—now it is finally happening,” says John Kelly, senior vice president and partner in the Boston office of CBRE. “But the cost of capital has not become an inhibitor of overall development.”

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Freddie Mac set all-time record for multifamily security issuance in 2018

GSE issued more multifamily securities than ever before

Freddie Mac continued its record-setting ways in the multifamily business in 2018, establishing a new record for multifamily security issuance for the second year in a row.

According to the government-sponsored enterprise, it issued $72.8 billion in multifamily securities in 2018, breaking its 2017 record of $68 billion.

“With our diverse array of securities, including our flagship K Deals, we continue pioneering efforts to meet private sector demand for investment products while shifting risk away from taxpayers,” said Debby Jenkins, executive vice president and head of Freddie Mac Multifamily.

“Our broad issuance platform had another outstanding year,” Jenkins said. “As we look to the future, we’re going to continue pushing for more innovations that can lower capital cost for borrowers, making rental housing more affordable.”

According to the GSE, it issued the following securities in 2018:

  • $61.6 billion in K Deal
  • $7 billion in SB Deals
  • $4.2 billion in KT Deals, PCs, Q Deals, M Deals, and ML Deals

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Multifamily Borrowers Will Continue to Have Access to Multiple Capital Sources in 2019

Capital sources ranging from banks to private equity funds still find multifamily lending attractive.

Multifamily borrowers will have lots of choices on where to get permanent loans in the new year—despite worries about rising interest rates, high property prices and overbuilding.

“There is nothing out there that is going to create a lack of liquidity,” says Gerard Sansosti, executive managing director with capital markets services provider HFF.

Multifamily investors can get permanent loans from a growing list of lenders, including Freddie Mac and Fannie Mae lenders, banks and life companies. Many private equity fund managers have also created debt funds to provide loans on apartment properties.

“Rising rates aside, 2019 should feel the same as 2018 in terms of liquidity,” says Peter Donovan, executive managing director with CBRE’s capital markets multifamily group.

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Fed Raises Rates, Trims Forecast for Hikes in 2019 to Two

The Fed unanimously raised the federal funds rate target to a range of 2.25 to 2.50 percent.

(Bloomberg)—The Federal Reserve raised borrowing costs for the fourth time this year, looking through a stock-market selloff and defying pressure from President Donald Trump, while dialing back projections for interest rates and economic growth in 2019.

By trimming the number of rate hikes they foresee in 2019, to two from three, policy makers signaled they may soon pause their monetary tightening campaign. Officials had a median projection of one move in 2020.

Following the decision, stocks erased gains and 10-year Treasury yields fell while the dollar bounced off its lows of the day. Investors may have been swayed by the Fed’s generally upbeat analysis and expectation of more rate increases than markets anticipate.

Chairman Jerome Powell and his colleagues said “economic activity has been rising at a strong rate’’ in a statement Wednesday following a two-day meeting in Washington. While officials said risks to their outlook “are roughly balanced,’’ they flagged threats from a softening world economy.

The Federal Open Market Committee “will continue to monitor global economic and financial developments and assess their implications for the economic outlook,” the statement said. The unanimous 10-0 decision lifted the federal funds rate target to a range of 2.25 percent to 2.5 percent.

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Bridge Lenders Try to Balance Strong Demand with Risk Awareness

Business volume for bridge lenders remains high, but they are feeling more cautious.

Evan Gentry, founder and CEO of Money360, believes 2019 will be the year the California bridge lender hits $1 billion annually in loan volume. Money360, which launched in 2014, has been doubling or tripling in size annually despite the entrance of Wall Street hedge funds into the bridge lending space, Gentry says.

“There’s a lot of opportunity in the market,” he notes. “Transaction volume was strong in ’18; we think it will continue to be strong in 2019.”

Money360 is one of hundreds of U.S. bridge lenders that still see plenty of runway at this stage of the real estate cycle, despite growing competition that has fostered a new level of aggressiveness, including higher leverage, lower pricing, no appraisal loans, innovative loan structures and originators willing to lend on non-cash-flowing assets.

This year “was one of our best years, even though it was very competitive,” says Marissa Wilbur, origination associate with Archway Fund, a Los Angeles-based bridge lender that doesn’t require appraisals and allows higher leverage than some of its competitors. “By the end of June, we had hit our (year-end) target goal.”

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Commercial Loan Originations Declined in the Third Quarter, But the Full-Year Activity Should Be on Par with 2017, MBA Predicts

Rising interest rates, concerns about cycle end contributed to a 7 percent year-over-year decline in commercial mortgage originations in the third quarter.

As commercial and multifamily originations appear likely to close out the year roughly on par with the record activity of 2017, capital markets experts are reading the tea leaves for 2019.

The Mortgage Bankers Association (MBA) reported a 7 percent year-over-year decline in commercial/multifamily lending activity in the third quarter, based on its quarterly survey results, but predicts commercial and multifamily mortgage originations to total $532 billion for 2018, similar to last year’s record volume of $530 billion.

For 2019, the MBA forecasts total commercial/multifamily originations of $541 billion, a 2 percent increase over 2018.

Capital should keep flowing next year, according to Jim Cope, head of production for capital markets at Walker & Dunlop, a commercial real estate services and finance firm. “As long as interest rates don’t get out of control, capital flows will continue to be strong in 2019,” Cope says. Bethesda, Md-based Walker & Dunlop was the nation’s 10th largest commercial real estate lender during the first half of 2018, according to data from Real Capital Analytics (RCA), a New York City-based research firm. “We are not hearing that anybody is pulling back in allocations for 2019,” Cope notes.

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