How a purchase market impacts the origination of small-dollar loans

Small-balance loans often fall to the bottom of the stack, as they are deemed less profitable by mortgage lenders. But a white paper by the Mortgage Bankers Association shows that originating this type of loan is more nuanced, especially during a market downturn. Per the trade group's analysis, conducted with data gathered from its annual performance report and a collaboration with STRATMOR Group throughout 2021 and 2022, production costs, which typically run higher for small loan balance loans, can actually fall during a purchase market.? This may be a silver lining for the government's ongoing push to encourage more small-dollar lending, which can be a key in helping more Americans achieve homeownership, particularly in suburban and rural areas, where small balance mortgage lending is more prevalent.?

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Capital proposal could lead to a credit crunch, critics testify

A proposed set of higher risk weights for mortgage-related assets at banks could broadly compound current strains on home affordability and conflict with other policies and rulemaking promoting it, critics testified at a congressional hearing Thursday. The new rules not only increase portfolio lending expenditures for low down payment loans, but aspects like a possible change affecting servicing rights also add costs for lenders and the market at large, said Bob Broeksmit, president and CEO, Mortgage Bankers Association. The rights and associated work of handling loan payments are a key cost for the mortgage industry at large and if depositories further withdraw from investments in them, costs for nonbank lenders already struggling to profit due to higher rates could rise, he said.

Homebuyers cancel purchases at highest rate in 10 months

Nearly 60,000 deals to purchase homes fell through in August, according to a report released Friday by Redfin. That's equal to roughly 16% of homes that went under contract last month, the biggest share of cancellations since October. More buyers and sellers scrapped deals last month as mortgage rates topped 7% for the first time since November. The average for a 30-year, fixed loan has hovered above that point for the past five weeks, data from Freddie Mac show.

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Lack of existing inventory drives new-home mortgages up by over 20%

Scarce supply of existing single-family homes pushed originations for new constructions higher on an annual basis for the seventh month in a row, the Mortgage Bankers Association said. Purchase loans for newly built homes leaped 20.6% in August compared to one year earlier and 4% month-over-month on an unadjusted basis, according to the MBA's builder application survey. While still a substantial upswing, the latest figures are down from a 35.5% annual surge in July, but headed up from that period's 0.2% monthly uptick.??

New Empower owner rebrands business as Dark Matter

Even though the Empower LOS was the second most-used origination platform in the mortgage business, it was commonly seen as taking a back seat to its former corporate parent's servicing technology. A rebranding to the name Dark Matter Technologies under its new ownership could change that. "We are now abundantly and solely focused on mortgage origination technology, and our clients specifically will see a difference there," said Sean Dugan, chief revenue officer. "As a lighter organization under Constellation ownership, we're going to be able to design and deliver in a more nimble way.” This transaction closed on Sept. 15, 10 days after Intercontinental Exchange completed its acquisition of Black Knight.

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