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Volume 22 - Number 1

January 5, 2018

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More of the Same in 2018? Production and Profits Expected to Drop Again

Industry economists and mortgage lenders widely expect 2018 to look a lot like 2017: slowing production volume, a further shift toward purchase-mortgage lending and more pressure on profits. The average of mortgage origination forecasts from Fannie Mae, Freddie Mac and the Mortgage Bankers Association indicates that production will total $1.688 trillion this year, a 4.8 percent drop from 2017. The refinance sector will take the biggest hit ... [Includes one data chart]

Bank Mortgage Repurchases Hit Record Low

Commercial banks and savings institutions reported another decline in the volume of home mortgages they repurchased from investors during the third quarter, according to an Inside Mortgage Trends analysis of call-report data. The banking industry repurchased or made indemnification for $698.3 million of single-family loans during the third quarter, down 2.0 percent from the previous period. That was the lowest quarterly repurchase figure since ... [Includes one data chart]

Production Income Slipped in 3Q17, Servicing Up

Mortgage bankers saw a small decline in profitability during the third quarter of 2017 despite a favorable turn in servicing and a bump up in mortgage production, according to the Mortgage Bankers Association’s quarterly performance report. The average firm participating in the survey reported $1.743 million in pretax income for the third quarter, down 17.7 percent from the previous three-month period. Average year-to-date pretax income on mortgage banking activities was ...

Third-Party Originators Gained Ground in 3Q17

Correspondent production platforms and wholesale-broker programs gained market share in all three major mortgage categories during the third quarter of 2017, according to a new Inside Mortgage Trends analysis. Correspondent lending showed the strongest gains. The channel’s production volume was up 15.6 percent in the conventional-conforming market, up 10.7 percent in government-insured lending and by a more modest 3.1 percent in ... [Includes two data charts]

Banks Seek Looser Capital Standards for MSR

Federal regulators’ efforts to simplify bank capital requirements relating to mortgage servicing rights don’t go far enough, according to industry participants. The institutions that the proposal is aimed at want even less stringent capital requirements, and large banks want to be included in the loosening. In October, federal banking regulators proposed simplified capital treatment for various assets, including mortgage servicing assets. The proposal would largely apply to banks with ...

What Do Tax Cuts Mean for Mortgage Bankers?

Although the GOP tax overhaul will dampen use of the once-sacred mortgage interest deduction by consumers, owners of mortgage companies will be able to keep more of the money they earn each year, according to interviews conducted by Inside Mortgage Trends. In particular, firms that have C-corporation status will benefit the most, thanks to a reduction in the corporate tax rate to 21 percent from 35 percent. S-corps, on the other hand, likely will not do as well because ...

New Treatment of Dividends a Boon for mREITs

Mortgage and commercial real estate investment trusts stand to benefit from a provision in the Tax Cuts and Jobs Act of 2017 that offers individuals a 20 percent deduction for REIT dividends. Analysts at Keefe, Bruyette & Woods said the deduction applies to “qualified business income,” which includes qualified dividends paid by REITs. The tax reform bill was signed into law on Dec. 22, 2017. Previously, non-capital gains dividends from a REIT were taxed as ...

Bitcoin Fever Spills Over into Mortgage Finance

The cryptocurrency Bitcoin recently surged above $19,500 a unit for a short time, briefly surpassing the “tulip mania” of the Netherlands in the 17th century to become the biggest recorded asset bubble in the history of Western civilization. That caused a number of participants in that space to slip into “irrational exuberance” mode, going to such extremes as not only buying Bitcoin with their credit cards but also taking out mortgages to snap up as much of the cryptocurrency as they possibly could ...

Poll

With originations expected to drop in 2018, will your shop turn to non-QM/non-prime mortgage products as a way to bolster volumes?

Yes, definitely. We’re planning a launch.

33%

No. It’s still difficult compliance/regulatory-wise.

20%

Maybe. It’s under consideration.

33%

Not now. But things could change as 2018 progresses.

13%