The rapid increase in interest rates seen in the first quarter took a big bite out of income from production and helped to goose servicing earnings. And while a downturn in originations was expected this year, it could be worse than expected.
The ratio measuring the fair value of banks’ mortgage servicing rights compared with their servicing for others hit a post-2008 high as of the end of March thanks to the spike in interest rates.
Usage of Freddie Mac’s Loan Prospector is largely confined to mortgages that will be delivered to the GSEs while usage of Fannie Mae’s Desktop Underwriter is more widespread in the mortgage market.
Higher interest rates didn’t have much of an impact on home price appreciation in March; Freddie Mac launched new automated underwriting capabilities; Fitch shifts its outlook for ratings of Finance of America Companies to negative; MISMO remains busy.
Issuance of expanded-credit MBS flowed in the first half of the year even as lenders grappled with higher interest rates. Issuance is expected to slow as lenders work to establish a new supply of loans with higher interest rates.
According to Equifax, the 60+ day delinquency rate on subprime auto loans hit a record in March. S&P countered that Equifax is double-counting loans, adding that delinquencies aren’t at record levels in the ABS market.