Lunch & Learn: Are appraisals the next big opportunity in mortgage fulfillment?

This Lunch & Learn for mortgage lenders will explore the evolution of the appraisal process as well as opportunities for innovation.

HousingWire Annual Virtual Summit

Sessions from HousingWire Annual 2021 are going to be virtually streamed on October 25. Register now for FREE to tune into what housing industry leaders had to say this year!

How Freddie Mac is addressing affordable housing challenges

Freddie Mac is focused on addressing limited access to credit, housing inequalities, creation and preservation of affordable housing supply and advancement of homeownership education.

How to increase minority homeownership?

Today’s HousingWire Daily features a roundtable discussion from HousingWire’s Lunch & Learn series that looks at “Unpacking the lender’s vital role in increasing minority homeownership.”

Politics & MoneyInvestments

Less expensive home sales benefit subprime bonds: Amherst

Analysts at Amherst Securities Group say better sales of less expensive homes this winter will disproportionately benefit subprime mortgage-backed securities, which have a greater concentration of lower-priced homes.

The average loan size of the mortgages in subprime pools is $165,000, versus $443,000 in prime deals, $242,000 in Alt-A deals and $383,000 in option ARM deals, Laurie Goodman and her team point out.

They say the benefits will occur through two channels.

Deals with a greater concentration of loans backing lower-priced homes should continue to experience a lower foreclosure discount because of the robust investor bid. This will eventually translate into a decline in severity, Goodman says. Higher-priced homes, on the other hand, are likely to struggle a lot more going forward, suggesting little narrowing in the foreclosure discount.

Secondly, if the prices on lower priced homes begin to rise, the transition rates — the rate at which performing loans become delinquent — are apt to decline more quickly, producing fewer eventual defaults.

“Conversely, if prices on higher priced homes continue to deteriorate, the transition rates on these loans are apt to burn out (decline) much slower,” Goodman says. “Most investors are not making this distinction, to the detriment of deals backed by lower balance loans.”

Amherst warns that investors should look at the judicial/non-judicial mix in their deals. As a result of the inventory clearing in non-judicial states, it expects foreclosure discounts in these states to narrow and home prices to have more upside. Some of the judicial states, or those in which a court order is necessary to proceed with the foreclosure process, will have further downside.

“This should translate into both lower severities and greater declines in transition rates, producing less eventual defaults,” Goodman says.

The average non-agency MBS deal has 58% non-judicial loans (42% judicial) by balance and 63% non-judicial loans (37% judicial) by loan count, according to analytics firms CoreLogic (CLGX) and 101data.

A growing share of foreclosures in states with a judicial process is slowing the pace of foreclosures that enter the market.

In the beginning of 2007, about 45% of foreclosures were in judicial states. In June, that figure stood at 62%. Analysts at Bank of America Merrill Lynch (BAC) say this is a result of not just delays from the attorneys’ general settlement early in the year, but also greater efficiency in the disposition of foreclosures in nonjudicial states.

Click on the chart below, provided by Amherst, to see that non-judicial states have gone a long way toward clearing their inventories, unlike their judicial counterparts.


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