The New York Times rambles, and mangles mortgages along the way

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Lending

3 lenders define the spring home-buying season

Embrace, Guaranteed Rate, Guardian give input

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With the spring home-buying season underway, HousingWire turned to a few lenders to get an inside view of how these past couple months have driven or hindered business.

Last year, buyers were quickly jumping into the market to catch record-low interest rates and premium refinance rates, while this year, home shoppers are being stifled by rising home prices and low inventory.

Wednesday morning Fannie Mae’s housing report gave some good news for the spring buying season, with the share of respondents who believe now is a good time to sell a home rising for the third month straight to 42%, an all-time survey high. 

This could be a positive foreshadowing for an increase in housing activity in the coming months, the report also noted.

So what do lenders have to say about the situation?

Their answers might surprise you.  

Dennis Hardiman, CEO and founder of Embrace Home Loans:

“Most everyone in the mortgage business has had to resize staffing levels to manage P&L concerns. The blip up in spring market activity is beginning to affect many firms' turn times in underwriting and processing,” Hardiman said.

As a result, Hardiman explained that Embrace has been building its capacity for both processing and underwriting ahead of market changes. Further, it has added a community bank program whereby it extends loan production services to those community banks.

Dan Gjeldum, senior vice president of Mortgage Lending with Guaranteed Rate:

Although the spring market is booming like Gjeldum hasn’t seen in years, he explained that a notable challenge they are seeing everywhere is a lack of inventory on existing homes.

“There are multiple offers on any property that is accurately priced to market and it can be frenzied. It’s refreshing to see for the health of the market, but in the same light, it can be rough when it comes to homes not appraising at the contract price. Mortgages are based on the lesser of appraised value or contract price, so if the value is less than price, buyers are forced to pay the difference — which they do more often than not,” he said.

Marcus McCue, executive vice president and chief business development officer with Guardian Mortgage:

The good news for Guardian is that it is seeing an expected increase in the number of contracts being executed by its pre-approved borrowers, along with an increase in purchase activity in March and April.

“However, the number of executed contracts for these homebuyer prospects had been later than we expected,” McCue said.   

So far, the number of executed contracts and other purchase activity is about 30% less than projected YTD 2014.

“Much of this is due to the very limited inventory of homes for sale, which would be our biggest challenge at this point. This limited inventory creates logistical issues for our pre-approved borrowers whose financing is contingent upon the sale of their current home.

"Secondly, limited inventory creates processing timeline issues with borrowers who do get accepted offers, as those borrowers and their agents are including quick closing dates to make their offers more attractive.

"Which in return causes 'rush' closings for us with closing dates that are 10-14 days after the date of the execute contract." 

As far as QM/ATR goes, McCue explained that he cannot specifically show that the concerns stressed at the beginning of the year are creating issues with prospective borrowers getting pre-approved for financing.

"However, there is certainly a market for a non-QM product that focuses specifically on asset-rich, solid credit quality borrowers whose income cannot be documented using the ATR requirements.

"But this not exactly new news since these borrowers were already a difficult approval in the pre-QM/ATR mortgage world that often resulted in them being a portfolio-only mortgage for those lenders who were able (and willing) to keep these loans in their portfolio."

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