Jan. 7: Putting numbers on mortgage job cuts; Valuation vendor news; the FTC & non-competes; letters on affordable housing and gender pay

Attorneys across the nation have taken note that the Federal Trade Commission has proposed a rule that would bar companies from requiring employees to sign a noncompete agreement, which limits workers’ ability to leave for a rival or to strike out on their own in the same field. The FTC says barring noncompete agreements could raise pay by $300 billion annually. So the FTC wants to ban companies from telling their employees they can’t work for competitors, and says it’ll help workers make $300 billion more a year. From the East Coast, Brian B. points out that the FTC believes that this is a “rule change” and that approval from Congress, which is a near-impossibility these days, is not needed. Along with this, there are plenty of other topics that are of interest to originators, lenders, and vendors, so let’s jump in.

Affordable housing & multi-family observations

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Affordable housing is a very hot topic, and Julie Cooper from Evergreen Home Loans writes, “Concerning lender partnerships with affordable housing developers, NGOs, cities and counties, considering the renewed appetite for public funding of all types of properties, (multi fam, owner, transitional and special needs), we can have impact on the creation and funding of these developments. We’re finding in the Pacific Northwest that our involvement and partnership results in real loans closed, and the industry’s contributions are vital. Many of these partners do not have our expertise and appreciate the help.”

A key sales technique for originators is to compare what a potential borrower is paying in rent versus the after-tax benefits of home ownership. Own, rent, or borrow, people have to live somewhere, and Bay Area Realtor Jenn Pfeiffer was kind enough to send along a study by Moody’s on apartment and multifamily trends. “The big story here is that demand for apartments fell off a cliff in Q4 2022, but that new supply was also very low, even though there are a large number of apartments currently under construction. National multifamily supply and demand both cooled to their lowest levels since 2009. Net absorption and new construction leveled off at just around 10,000 units in Q4, keeping the national multifamily vacancy flat at 4.4 percent. … Total construction delivery and net absorption only reached 100,470 units and 135,472 units for the year respectively, the weakest record over the past decade.

“Expectedly, rent growth cooled after the ‘hot’ summer season and asking/effective rent growth slid off the peak of 2.8%/3.0% in Q2 to 2.0%/2.0% in Q4. Effective rent climbed above $1,700/unit for the first time, $294 higher than pre-pandemic (or 20.6%). Unexpectedly, the stable rent growth for both new and existing leases was still the second highest Q4 growth rate since 2000 and only second to the record growth last winter. … As affordability concerns pressured rent growth, annual asking/effective rent growth plummeted from 16.9%/17.6% in Q2 to close Q4 in single-digit range, at 9.4%/9.6% respectively.

“Moody’s Analytics (Reis) reported that the apartment vacancy rate was at 4.4% in Q4 2022, unchanged from 4.4% in Q3, and down from a pandemic peak of 5.4% in both Q1 and Q2 2021.

Reis also reported the effective rents were up 2.0% in Q4 compared to Q3, and up 9.6% year-over-year. Effective rents declined significantly in the early stages of the pandemic, and rents are up 6.5% annualized over the last 3 years.”

“Multifamily effective rents fell in 15% (12 of 79) of all markets, 40% of which were ‘pandemic darling’ markets with the fastest rent growth during the COVID pandemic. Baltimore (-3.4%), Memphis (-3.3%), San Bernardino/Riverside (-2.0%), Atlanta (-1.7%), Palm Beach (-1.6%), and Ventura County (-1.1%) all recorded more than 100 bps decline in effective rent. Monthly data shows a decline in market rent across over 20 markets although the quarter-over-quarter data still recorded positive growth. We expect quarterly rent decline in some of those markets early in 2023.

“We are starting to see rents decline in some areas as more supply comes on the market. This should increase in 2023. Currently there are 932 thousand multi-family units under construction. This is the highest level since December 1973! The completion of all these units under construction should help with rent pressure and we will see more areas with declining rents in 2023. (Apartment vacancy data courtesy of Moody’s Analytics.)

Gender pay gap? What gender pay gap?

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A couple weeks ago the Commentary touched upon some studies discussing gender pay. “…we have a gender pay gap that has remained relatively stable over the past 15 years or so. In 2020, women earned 84 percent of what men earned, according to a Pew Research Center analysis of median hourly earnings of both full- and part-time workers. Common explanations of this disparity, present across most industries and professions, include the perception that women are less likely than men to negotiate raises and promotions, women’s disproportionate childcare responsibilities, and stereotypes about women’s and men’s respective talents. A new paper highlights an underexplored way in which stereotyping can impact the livelihoods of women, particularly those working in high-skilled, client-based professions, long after they’ve committed to their industry of choice. The researchers reveal that gender stereotyping can weaken clients’ perceived trust in female professionals’ core offering: their expertise.”

The note prompted Dick Lepre with CrossCountry Mortgage to send, “One issue which gets media coverage but is almost never reported accurately is the difference in income between men and women. What is almost always omitted is the fact that men work more hours per week than women. In June men, on average, worked 40.5 hours/week and women, on average, worked 36.6 hours/week (details here). This is a 10% difference. This study adjusts the gender pay gap for factors such as danger of injury or death, education, part time vs. full time. Comparing workers with similar age, education and years of experience, job title, employer and location, the gender pay gap in the U.S. falls to 5.4 percent (94.6 cents per dollar).  A similar gender pay gap exists for the UK, Australia, Germany and France.”

Dick wrapped up with a wink and a nod. “Lastly, one reason men, on average, earn more than women is because men do the dangerous jobs.” Thank you, Dick!

Job cuts in our residential lending industry

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Wells Fargo’s economics team sliced and diced the current job numbers in the mortgage industry. To no one’s surprise employment is down, but by how much month over month or year over year?

“Total mortgage industry employment was down -9,500 m/m, which is one of the more sizable m/m reductions we have seen since mortgage companies began headcount cuts earlier this year. The current tally of 377,600 total mortgage employment is down -11.7% from the recent 10+ year high. This month was a good step, but we believe we will need to see additional sizable reductions to bring the supply/demand back in balance. We also note that the -11.7% mortgage employment decline from the peak, per the BLS data, compares to the “active” mortgage loan officer count down -17% from the peak, per NMLS (see MLO Tracker: Another Sign that Excess Capacity Is Exiting the Mortgage Industry).

“Total mortgage employment is down in November, which includes employment at 1) mortgage banking and 2) mortgage brokerage firms. The data is released on a month lag, so the latest data is as of November. We focus on employment data, as we believe it is a proxy for mortgage industry capacity. For the month of November, total mortgage employment was 377,600 (down -9,500 m/m vs. -3,000 last month), down -10.5 percent yr/yr, compared to -8.8 percent last month.”

Wells Fargo’s report wrapped up with, “Mortgage broker headcount is down in November. In November, mortgage broker employment was down -2,300 m/m after the 2,000 loss last month. Mortgage broker employment is down -2 percent yr/yr, compared to -0.6 percent last month.”

Vendor and third-party updates in the appraisal/valuation world

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In 2020, AXIS Appraisal Management Solutions, in a quest to add diversification, acquired a 55-year-old company that performs Governmental inspections for HUD and FEMA. In 2022, AXIS forged strategic partnerships with CAPTURE Data Services and BEACON Property Data Collection Services to provide a best-in-class suite of alternative valuation products and hybrid inspection services required for today’s (and tomorrow’s) collateral valuation needs. Diversification, sustainability, and a full range of offerings, including traditional property appraisals, inspection, property data collection, BPO’s, and a waterfall of alternative valuation services uniquely positions AXIS to meet the market demands of 2023.

 

AppraisalWorks® partnered with Mortgage Cadence allowing lenders to consolidate multiple appraisal vendor and order management systems onto the AppraisalWorks platform for centralized management and automation of the complete appraisal management function.

The integration will enable lenders to quickly select the best-fit property valuation model directly within the Mortgage Cadence platform. Lenders benefit from real-time communication, on-demand access to appraisal information, customizable workflows, greater efficiency and complete transparency throughout the appraisal process.

And then there’s the Accurate Group – Mortgage Cadence partnership. Accurate Group, a leading provider of technology-driven real estate appraisal, title data, analytics, and e-closing solutions, announced a strategic partnership with Mortgage Cadence, an industry-leading digital loan origination (LOS) platform. Lenders can access Accurate Group technology via the Mortgage Cadence Collaboration Center and lenders using Mortgage Cadence have access to Accurate Group’s full spectrum of product and service offerings – including traditional appraisal, ValueNet™ hybrid and desktop appraisals, automated valuation models (AVMs), title data and closing technologies.

Appraisal management software company, Reggora, announced the results of its 2022 borrower experience survey, detailing the importance of the appraisal with the overall borrower satisfaction during the lending process. The survey revealed that, overwhelmingly, borrowers care about a positive experience during the appraisal portion of the loan process; appraisal timeliness (quick completion), the accuracy of the appraisal (no revisions needed), and communication/transparency during the process were ranked as the most important factors with an appraisal. Surprisingly, borrowers ranked the price of the appraisal as their least important factor when it comes to the appraisal.

Altisource has launched NestRange as a cost-effective, data-informed Automated Valuation Model, fully interactive tool that estimates the value of single-family homes, condominiums, townhomes, and multifamily/apartments. Drawing from more than 150 million properties including over 750,000 active property listings, this SaaS product leverages a national property database, geospatial comparable data, machine learning and AI. NestRange users have control over a variety of parameters including valuation input variables, property conditions, and the ability to select specific comparables used in the AVM calculation.

Class Valuation announced its latest growth in the northeastern market with its key acquisition of PropertyVal, one of the largest independent residential appraisal firms in the state of Maine and a highly reputed AMC in the New England market. Class Valuation’s innovation focus has opened the doors for the development of some of the fastest digital appraisal solutions, process automation, and data science in the industry. Leveraging technology to expedite the entire workflow, from assigning all the way to quality control, Class can deliver faster, more credible results which benefit both clients and appraisers alike.

CubiCasa, launched its partnership program for Multiple Listing Services (MLS) and announced a contract with PrimeMLS. In today’s market conditions, agents need every tool possible to market their listings. Floor plans are consistently ranked by consumers as one of their most desired pieces of information on a listing. CubiCasa allows anyone with a smartphone to create a digital floor plan of a property in just five minutes, and its new MLS program provides unique member benefits to agents and appraisers at participating MLSs. Following its free product launch in August, CubiCasa recently announced record adoption of digital floor plans, with a 455% increase in user signups year-over-year (YoY) and a 98 percent increase in new U.S. real estate scans. To date, CubiCasa has produced more than 1 million floor plans and is used in 172 countries.

A father passing by his son’s bedroom noticed the room unusually clean and saw an envelope propped up prominently on the pillow. It was addressed, “Dad.” With the worst premonition, he opened the envelope and read the letter, with trembling hands.

Dear Dad. It is with great regret and sorrow that I’m writing you. I had to elope with my new girlfriend, because I wanted to avoid a scene with mom and you.

I’ve been finding real passion with Stacy. She is so nice, but I knew you would not approve of her because of all her piercings, tattoos, her tight motorcycle clothes, and because she is so much older than I am.

But it’s not only the passion, Dad. She’s pregnant. Stacy said that we will be very happy. She owns a trailer in the woods, and has a stack of firewood for the whole winter. We share a dream of having many more children.

Stacy has opened my eyes to the fact that marijuana doesn’t really hurt anyone. We’ll be growing it for ourselves and trading it with the other people in the commune for all the cocaine and ecstasy we want.

In the meantime, we’ll pray that science will find a cure for AIDS so that Stacy can get better. She sure deserves it!

Don’t worry Dad, I’m 15, and I know how to take care of myself. Someday, I’m sure we’ll be back to visit so you can get to know your many grandchildren.

Love,

Your son, Josh.

P.S. Dad, none of the above is true. I’m over at Jason’s house. I just wanted to remind you that there are worse things in life than the school report that’s on the kitchen table. Call when it is safe for me to come home.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The Secondary Market’s Focus” is the current blog. The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2023 Chrisman LLC. All rights reserved. Occasional paid job & product 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