- Key Insight: Learn why mortgage originators question the real-world impact of the new housing executive order.
- Supporting Data: The average $207,000 cost of fraud and forgery claims associated with refinances
Not everyone in the mortgage industry is fully in love with
Title insurance and savings pass-through
What the order does: The FHFA Director may make the title acceptance pilot permanent and nationwide, letting automated title review replace lender's title insurance on eligible refinances. Options include LTVs above 80%, more title-assessment providers, waived appraisals on some cash-out refis, and reduced fees. Savings from the title program must go to borrowers, and lenders must tell them about it.
Originator reaction: "For a broker shop like mine, the refinance piece matters most," said Nathan Young, the founder of Jacksonville, Florida-based North Star Mortgage Network. "If Fannie and Freddie widen the title waiver and skip the appraisal and income re-verification on rate-and-term refis that lower the payment, that cuts real cost and real time off a file. Those borrowers are
Vickie Lasher, a branch manager and certified mortgage advisor with Castle & Cooke Mortgage, said the refinance piece "could help our industry greatly," adding it might be a "re-enactment" of the
Jason Madiedo, co-CEO of SimplyPMG, said the title insurance portion of the executive order is aimed at the wrong thing.
"Nobody refinances to save $800 on title," Madiedo said. "People refinance for one of two reasons: to lower a payment, which is rate-driven, or to pull cash out." This dollar amount does not change either calculation when it comes to refinancing.
The real lever in this is changing the
"Removing that would have made a far bigger difference than the
A vendor in the home equity/refinance business agrees.
"For our business, the order matters less than rates do," Lukas Kallweit, the founder of LenderMatch, said.
His platform pairs homeowners with lenders who do home equity loans and lines of credit, plus refinancing. With many homeowners holding mortgages at rates below the current market, home equity products have become popular.
Giving consumers cheaper title and lower loan-level fees help at the margin, mostly on smaller refinances where closing costs eat the savings. However, Kallweit continued, these don't decide whether a refinance makes sense with today's rates.
"The part I'm watching is whether lenders actually use
Underwriters, investors and title industry reaction: Bose George, who covers MIs and title insurers at Keefe, Bruyette & Woods, called the order's impact "benign" for those industries.
"The EO would make the title pilot permanent, but it would still only apply to refinances so would remain a small part of the overall market, with refis an estimated 7% of title premiums for the industry," George said.
But Scott Buchta, head of fixed income strategy at Brean Capital, thinks the title portion of the order is a negative for mortgage-backed securities investors.
Expansion of the title pilot creates "a de-facto streamline refi option for Freddie Mac/Fannie Mae loans."
Buchta believes the order as worded "will add a significant amount of negative convexity to the Freddie Mac/Fannie Mae MBS universe as a whole. This is especially true for pools backed by higher-risk borrowers with higher interest rates in particular."
The American Land Title Association said its members
"Any effort to make housing more affordable, however, must also preserve the essential consumer safeguards that protect Americans' most valuable assets," Morton continued. "Fraud is unaffordable, and the threats facing homeowners are growing."
He pointed to the growth of seller-impersonation fraud as well as fraud and forgery claims associated with refinances average nearly $207,000 per instance.
Mortgage insurance cancellation
What the order does: The FHFA Director may direct Fannie and Freddie to pilot automated valuation models that spot borrowers eligible to drop mortgage insurance, for loans made after the pilot launches. The order also addresses private mortgage insurance cancellability, an issue recently raised by Federal Housing Finance Agency Bill Pulte in his order to Fannie Mae.
Originator reaction: Young cautioned that the mortgage insurance cancellation piece only works if servicers actually send the notice and the automated valuation models hold up when the property is run.
"Most of this is a long play. People will see the benefit of the mortgage insurance piece years from now," said Madiedo. "Today property values are under pressure, and that's the more immediate problem."
Analysts and industry commentary: "We estimate that this new plan would reduce the duration of the MI policy (assuming no refis) by a couple of years, even with modest home price appreciation; any refis would minimize the impact," said Douglas Harter, an analyst at BTIG. "Importantly for the MIs this would only apply to newly written policies."
U.S. Mortgage Insurers supported
"A pilot program on new originations can test new approaches and help future homebuyers save if home price appreciation responsibly supports earlier cancellation, while still providing the benefits that private MI delivers today: buying a home years sooner, saving tens of thousands of dollars at closing, and deducting premiums at tax time," Appleton said.
Manufactured housing
What the order does: A new HUD- and FHFA-led task force has 180 days to recommend streamlining federal approvals and removing barriers to modular and factory-built homes. It will also study tying federal grants to state and local adoption of standardized permitting.
Originator reaction: Madiedo finds the manufactured housing portion of the executive order interesting. This is a good option for first-time home buyers to consider but the obstacle is not the cost.
"It's that the product took hold in the Pacific Northwest, parts of Arizona and a bit of the Midwest, but most other coastal states have shown less interest," he said. "Whatever the task force does on cost, the real test is the dynamic between municipalities and counties and the desire to expand the local manufactured housing market."
Direct loan rates (VA and USDA)
What the order does: USDA and VA must lower rates on single-family loans they make directly, subject to law and appropriations. The directive reportedly applies only to the small number of loans directly made by those agencies.
Originator reaction: Young noted the limitations on the VA/USDA section. Lasher joined those who felt the section had limited impact.
On this portion, she said, "There will be no benefit to anyone from this order as the market dictates rates not the government. They would have been better off controlling what they could, which would have been the governmental fees associated with these loans. This is not going to help our industry at all."
Trade group response: "These actions to reduce title insurance costs, promote manufactured home affordability, and reduce mortgage loan costs for veterans have long been CHLA priorities and they build on the Administration's track record of constructive homeownership actions," the statement from Community Home Lenders of America Executive Director Scott Olson declared.
Implementation and overall impact
"The bigger question is lender overlays," Young said. "If investors and lenders keep their own stricter rules, the streamlining stalls at the underwriting desk."
Originators will have to see how this plays out in practice, said Collin Donahue, mortgage loan officer at Alliant Credit Union.
"But every little bit helps," Donahue said. "As an industry, we'll take any changes that lower costs for borrowers."
The changes won't solve affordability issues on their own, but lowering costs in any portion of the process helps, he said.
Northern Virginia Realtor Dell Jeanty, founder of Dell Residential Group, believes the executive order could help bring more buyers into the housing market if it improves affordability and increases supply.
"However, high mortgage rates, other economic uncertainties, and limited inventory will continue to make homeownership difficult for many buyers," Jeanty said. "For Realtors, the real impact will depend on whether these changes lead to more qualified buyers and increased home sales."
Commercial real estate lender and broker Nick Panize, president of Westgate Capital Ventures does not expect a significant immediate impact on his company's business, but it depends on how the executive order is implemented.
"The biggest factors affecting lending right now are still interest rates, property values and lenders appetite for risk," Panize said. "Any policy that reduces regulatory costs or makes it easier for lenders to deploy capital could ultimately benefit borrowers, but I wouldn't expect major changes overnight."
Especially on how mortgage originators handle business.
"At the end of the day, lenders are still going to underwrite deals based on the fundamentals, regardless of what's happening in Washington," Panize said.
Industry and trade group response to the E.O.
The Broker Action Coalition said the order creates "a major opportunity" for cutting housing costs.
"This is a massive win for American homeowners," said Brendan McKay, chief advocacy officer at BAC in its statement. "We're talking about reforms that could cut refinancing costs by nearly $2,400 on an illustrative $500,000 loan, as well as a new pilot that would proactively cancel mortgage insurance once appropriate equity thresholds have been met. That's real money."
The order is a common-sense step, said Isaac Boltansky, the head of public policy for Pennymac.
"There is more work to do, and Pennymac looks forward to supporting FHFA, the GSEs, and the Administration as they turn these priorities into practical, lasting improvements for consumers."
The Mortgage Bankers Association pointed to the order's acknowledging the need to balance the interests of consumers, taxpayers, and the government-sponsored enterprises.
It will work with Fannie Mae and Freddie Mac along with the FHFA on a timely and thorough implementation.
"MBA will continue to identify and advocate for additional ways to help homebuyers navigate today's higher interest rate environment and to work with the Administration and Congress to advance policies that deliver meaningful results for homeowners, homebuyers, and renters," the statement from Bob Broeksmit, president and CEO, said.
