As cybersecurity costs rise, lenders ask: how much is enough?

Cybersecurity is a critical tool for the trillion-dollar mortgage industry facing increasingly pervasive and severe data breaches. Lenders and servicers in the past 12 months have been hit hard by data breaches compromising sensitive information of millions of customers, which forced them to bear untold costs for responses. The price of digital tools and labor to combat cyberthreats is climbing, experts said, and cyber insurance policies are rising as much as 40% leading some companies to drop policies altogether. Cybersecurity professionals are urging mortgage firms to tread carefully in making difficult balance sheet decisions. The financial impact of a data breach is at an all-time high in 2022, with an average cost of $4.35 million according to IBM research. Those expenses include lost business, detection, notification and post-breach responses.

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FHA, VA purchase activity shows signs of renewed interest

The MBA's Market Composite Index, a measure of loan volumes based on surveys of association members, dropped for a second straight week, slipping 1.2% for the seven-day period ending August 19. Compared to the same time frame a year ago, mortgage volumes came in 63% lower. The seasonally adjusted Purchase Index declined 1%, but activity in the lower-priced end of the market showed week-over-week momentum, despite a jump in 30-year interest rates. On the back of purchase activity, the seasonally adjusted Government Index rose 2.7%, with federal-agency backed loans also accounting for a larger share of overall volume from a week earlier.?

Ginnie Mae's nonbank servicing share is inching up in '22

Ginnie Mae's nonbank servicing share has continued to climb this year, albeit at a slower pace than in 2021, according to new analysis of data from multi-issuer mortgage-backed securities pools. The share of the large nonbank servicers in this market, which is the largest that the government agency insures, has climbed to 72% so far in 2022 from 71% last year, according to data from FHN Financial, an affiliate of First Horizon Bank and CPR & CDR, a prepayment analytics provider. The number is significant in the context of the counterparty standards Ginnie recently revised in coordination with the Federal Housing Finance Agency, as nonbanks are "the main targets" for the new requirement, FHN noted in the report.

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LoanDepot, appraiser sued by Black couple for racial bias

Nathan Connolly and Shani Mott claim a discriminatory, undervalued home valuation led to the lender's rejection of their refinance application, according to a federal suit. The couple, both professors at John Hopkins University, live in Homeland, a small, historic and predominantly white neighborhood in north Baltimore. The couple contends their first appraisal was based on questionable calculations stemming from the appraiser’s "racist beliefs." LoanDepot rejected the couple's refi application based on the low valuation, and a lending officer allegedly answered the couple's concerns by giving them an incorrect deadline to appeal and stopped responding to their calls for months. The couple also claims they later received a higher home valuation and secured a refi loan with a different lender, after "whitewashing" their home for another appraiser. LoanDepot in a statement said it strongly opposes bias in the mortgage process.?

How long will the lending spurt last?

U.S. banks' second-quarter loans grew 4% from the prior quarter and 10% from a year earlier, according to a Keefe, Bruyette & Woods analysis. Community and regional banks led the charge, with sequential growth of more than 5%. In all, KBW said, 94% of banks posted quarter-over-quarter loan growth and 99% reported year-over-year expansion. However, recession fears have mounted because of soaring inflation and a surge in interest rates. Chris Nichols, director of capital markets at the $46 billion-asset SouthState Corp. in Winter Haven, Florida, said many banks' underwriting standards are sure to become increasingly conservative in the second half of 2022. Lending will likely slow before the end of the year, he said, as banks become more selective and as borrowers balk at rising interest expenses.

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