Apr. 14: MSA chatter; trends in home equity, HELOCs, reverse mortgages, housing inventory, and millennials – they’re all connected

Let’s end the week with a little telephone trivia that you can use at Happy Hour tonight. Alexander Graham Bell filed a patent for the telephone in 1876 (141 years ago). The following year President Rutherford B. Hayes had one installed in the White House (the telephone number was “1” and the Treasury Department possessed the only other direct phone line to the White House). And area codes? They popped up in 1947. And you’ll notice that the large population centers (New York, 212, Los Angeles 213, Dallas 214, Philly 215, Chicago 312, etc.) were given low-numbered area codes to save time dialing when using rotary dial telephones. Who says you never learn anything by reading this commentary?


While we’re on learning, mortgage brokers can sign up for a free webinar presented by Finance of America Mortgage. “Add a HELOC to a FAM First Mortgage-The Perfect Pairing” will be hosted by Ginger Bell of Go2Training and will be held today at 11AM PT. Click here to register.


It is a timely topic, given all the millions of home owners with 30-year mortgage rates in the 3% range who are perfectly happy staying where they are. Research released from the National Council on Aging and a new Issue in Brief from the Center for Retirement Research at Boston College show that home equity has gone largely underutilized by older homeowners who have been unwilling to consider housing wealth as a resource for retirement funding. NCOA and CRR both show that limited awareness and knowledge of home equity tools contribute to the low take-up of financial products, such as reverse mortgages.


ReverseVision announced earlier this week that Atlantic Coast Mortgage (ACM), a growing regional mortgage lender serving the mid-Atlantic, has selected RV Exchange (RVX) reverse mortgage loan origination software to support ACM’s new home-equity conversion mortgage (HECM) division. ACM plans to grow its dedicated team of reverse mortgage consultants and is actively seeking loan officers with HECM origination experience. ReverseVision’s RVX serves as a centralized exchange, connecting all participants in the lifecycle of a reverse mortgage by allowing them to log in to a single system to share documents and information for each part of the loan process, encompassing everything from point-of-sale, processing, underwriting, funding and post-closing to secondary marketing.


Rates have come back down, but last November they shot up after the election due to inflation fears and general economic uncertainty. Certainly, rising rates have crimped refinancing demand and as a result banks are offering more aggressive lending products and offering homeowners an opportunity to extract more equity from their properties. If the rate rise persists, some think it could weigh on housing demand and prices.


The National Reverse Mortgage Lenders Association reported that retirement-aged homeowners saw a combined 2.8 percent increase of $170.7 billion in home equity in the fourth quarter of 2016, boosting their total housing wealth to $6.2 trillion. “A 2.4 percent increase in home values for owners 62 and older in Q4 2016 drove the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI) to 221.75, an all-time high since the index was first published in 2000. On a year-over-year basis, the RMMI index rose by 9.0 percent in 2016, compared to an increase of 8.6 percent in 2015 and 8.0 percent in 2014.”   Some people will say that California’s housing market is great. These are typically owners who are seeing their equity increase. Others think that the California market is in bad shape. Take your pick.


It’s a good time to look at the changing demographics of our nation, and housing industry. As I travel around to various parts of the country I continue to hear stories about a lack of listings. How is the 2017 purchase market going to replace the 2016 refi volume if there aren’t any houses to buy in some areas? And how do things shape up when the population could soak up 1.5 million units a year but only 700-800 thousand are being built? Thus, we find us becoming a nation of renters. Bloomberg reports 52 of the largest 100 US cities had more renters than homeowners in 2015 (the latest data available). In some cities, this is the lowest level of homeownership in 50 years.


How about this stat? The percentage of Americans aged 18 to 34 who live with their parents or another family member is 39.5%. The figure has been steadily rising since the fifties – and the story notes that it is at a 75-year high!


Having just launched Ally Home Loans, its direct-to-consumer mortgage offering, Ally Bank wanted to gauge consumer sentiment about the mortgage application process through a recent survey by Harris Poll. “Ally’s 2017 Home Loan Study showed that borrowers focused on the economics of a mortgage, with service and convenience following closely. “Among those who have ever had a mortgage, only slightly more than a third (37 percent) were very satisfied with the mortgage application process. Four in five Americans who ever had a mortgage/plan to apply for one in the future (81 percent) said the total amount of closing costs did/would factor into their lender decision. And 93 percent of Americans said a reputation for excellent customer service and convenience would be very/somewhat important in their decision on which lender to choose.


(The mortgage survey was conducted online from March 28-30, 2017 among 2,167 U.S. adults ages 18 and older. As a reminder, Ally Financial Inc., with nearly $164 billion in assets, is a leading digital financial services company and a top 25 U.S. financial holding company offering financial products for consumers, businesses, automotive dealers and corporate clients.)


What about millennials and first-time home buyer demographics?


Surveys show that millennials are sick of being surveyed. Seriously, the Census Bureau defines “millennial” as someone born between 1982 and 2000. It is generally agreed that plenty of U.S. residents in their 20s or early 30s need to live some place, and most want to buy a home. But folks want numbers! Trulia research finds 40% of those aged 18 to 34 years old are still living with parents, siblings or relatives as of the end of 2015, the highest level in 75 years (1940). And fewer are moving: Pew research finds 20% of millennials say they changed their address last year vs. 26% of Gen X who did so at their same age and 27% of Baby Boomers at that age.


Maybe they’re not moving because Baby Boomers aren’t moving, which stifles the move-up buyer, which stifles first-time home buyers. But it is estimated that within the next decade 64 million millennials will become parents. But millennials not going mobile, despite being unmarried, childless, and without mortgage, millennials are a lot less mobile than prior generations at the same age. Someone commented, “I would try to find the time to figure out why, but I’ll have to consult my student loan company about whether I can afford to do so.”


Besides moving less, are millennials any different than the rest of us? Probably not that much different. Are female millennials any different than other millennials? This article seems to think so, especially in terms of how the mortgage industry does business.


How does all this apply to lenders? As an indicator of business trends, the industry wonders if Quicken Loans, known for its refi efficiency, will be used by home buyers or real estate agents for purchases. (LOs believe that buyers & agents want an expert, a key point of contact, on weekends and all hours, which may not suit internet-based or call center applications so well.) But who said advertising doesn’t pay? Reportedly, one year after Quicken Loans’ initial Rocket Mortgage Super Bowl ad, the FinTech lender funded $7 billion of its record $96 billion in total closed loan volume in 2016 through Rocket Mortgage. And in 2016 the company reported that two-thirds of Rocket Mortgage clients used it to finance a home purchase and 80 percent of those consumers were first-time home buyers.


“While millennials are more likely to use Rocket Mortgage, we see strong adoption across all demographics,” said Regis Hadiaris, Senior Product Manager of Rocket Mortgage. “Many consumers can’t, or simply won’t navigate the mortgage process solely within the limited timeframe of traditional business hours. They expect technology to service their demands and simplify their lives…The development of Rocket Mortgage…has enabled hundreds of thousands of home buyers to eliminate paperwork entirely from the mortgage process, ensuring accuracy for the lender, virtually eliminating any compromise of highly sensitive data and closing 12 days faster than industry averages.”


People in their 20s and early 30s do influence confidence that the housing market will do well, despite red-hot prices in many areas. A recent monthly sentiment index from Fannie Mae rose to the highest level since 2011, when the survey began, thanks to a surprising surge from millennials. Both buyers and sellers alike are feeling very good about the housing market this spring, even as home values hit new highs and mortgage rates move up.


Are there any houses to buy? Thank you to Mason-McDuffie’s Scott Short who sent me this set of charts explaining America’s housing inventory problem.




In MSA news of sorts, from North Carolina word crossed my desk of an e-mail sent out by someone with RE/MAX regarding Movement Mortgage in Cary. Although there are some inaccuracies, I thought it useful to publish to give a real estate agent manager’s perspective. The letter goes, “I want to share with you that Movement Mortgage has given 30 day notice that they plan to end their office desk rental and advertising program with RE/MAX UNITED…I do have some insight into why they made this decision. They have been a great partner for many of you in recent years.


“Most of you know that we have an Advertising Agreement with Movement Mortgage that allowed them the ability to rent space in our office and to advertise their name in our office and at some of our listings. The CFPB in Washington is the government agency that oversees all financial organizations and they have made it clear they don’t like lenders and real estate companies having Marketing or Advertising agreements. In recent months, the CFPB has fined many lenders and real estate companies for their failure follow guidelines with these agreements. While Movement and RE/MAX UNITED both believe we have followed the agreements, we have seen a large number of unhappy agents and consumers with the ‘Yard Signs’ that were the main part of this agreement. While intended to be a form of advertising, they turned into a form of frustration directed back at Movement and its loan officers. This frustration is not limited to our office or our market.


“Just like some of you, I have been asking Movement to find other acceptable ways to promote their name without the yard signs. However, their third-party company that evaluates the value of the agreements pushed back saying consumer facing yard signs was the best method to achieve ‘advertising agreements’ with real estate companies. The 3rd party company gave little or no value to internet-based marketing, which puzzled all of us. Again, we hope this will find a way to work its way out in the future. Moving forward we will continue to explore ways to keep our relationship with Movement Mortgage…”


Capital Markets


The bond markets are closed today, and closed early yesterday in a quiet session – so take any rate sheets that are issued with a grain of salt, as they say. The Federal Reserve is open. The news yesterday served to push rates lower: the headline producer price index for March saw its first decline since August but year-on-year growth rose to its fastest pace since 2013. The core PPI was unchanged. Both measures missed estimates. Michigan Sentiment rose more than expected to 98.0 in March and one-year inflation expectations remained at 2.5%. And we had the news that the U.S. had dropped a massive bomb (MOAB) in eastern Afghanistan although the 10-year yield did hit 2.22%.


For numbers on Thursday the 10-year note rallied/improved nearly .5 in price dropping the end-of-day yield to 2.25%. The 5-year risk-free Treasury security and agency MBS prices improved .125-.375, depending on coupon, maturity, and type.


Today the bond and equity markets are closed in observance of Good Friday. But that didn’t stop the U.S Government’s Bureau of Labor Statistics from releasing the March Consumer Price Index data (lower than expected at -.3%, up 2.4% year over year), and the Census Bureau from releasing Retail Sales (-.2%, as expected). The market’s reaction will be seen on Monday.



Giuseppe excitedly tells his mother he’s fallen in love and that he is going to get married.

He says, “Just for fun, Mama, I’m going to bring over three women and you try and guess which one I’m going to marry.” The mother agrees.

The next day, he brings three beautiful women into the house, sits them down on the couch & they chat for a while. He then says, “Okay, Mama, guess which one I’m going to marry?”

Mama says immediately, “The one on the right.”

“That’s amazing, Mama. You’re right. How did you know?”

Mama replies: “I don’t like her.”






(Copyright 2017 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)


Rob Chrisman