How underwriting technology is progressing as guidance evolves

Artificial intelligence could help lenders navigate secondary market underwriting guidelines, but only if it is in line with the latest guidance from regulators. Developments like the Consumer Financial Protection Bureau's recent directive on artificial intelligence and denials do signal renewed regulatory scrutiny in this area, Frank Poiesz, business strategy director, Dark Matter, told attendees at Digital Mortgage 2023 this week. Regulators "are very concerned and are going to track closely how credit decisions are made," Poiesz said. CFPB guidance on chatbots, in addition to the directive on denials, have made vendors cautious, and "that's why I feel that we're kind of at a point where we've got to watch how we use AI as an industry," he said.

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Hurricane season to lead to more delinquencies, says CoreLogic

Mortgage delinquency rates ticked higher in July compared with the previous month, and given that hurricane season picks up in late summer and early fall, that could drive them higher through 2024, CoreLogic said. Approximately 2.7% of outstanding mortgages were 30 days or more late on their payment or in foreclosure. This was up from 2.6% in June but down from 3% for July 2022. The home equity gains of recent years are likely going to keep borrowers who moved into the later stages of the delinquency timeline from entering the foreclosure process, said Molly Boesel, principal economist for CoreLogic.

Asking prices being cut more frequently as affordability wanes

As home affordability decreased, sellers reduced asking prices more frequently this September, with the pace coming in above typical seasonal patterns. Approximately 6.5% of homes on the market saw asking prices reduced during the four-week period ending Sept. 27, according to new research from Redfin. The rate corresponds to approximately one in 15 properties on the market and represents an increase from 5.8% a month earlier. That is a sharp rise from what has been reported in past years over the same time frame. The uptick in price cuts comes as low inventory and rising interest rates take a bite out of affordability, according to several recent reports.?

What bankers need to know about the government shutdown

As Congress hurdles toward yet another government shutdown, bankers might experience more collateral damage than they have in the past. Typically, government shutdowns leave financial institutions, sans those that largely serve government employees, alone. Fat Bear Week will likely not be so fortunate. Government shutdowns have almost become part of business-as-usual on Capitol Hill, a symptom of deepening partisan divides that make even must-pass legislation — like funding the federal government — difficult. Most on Wall Street assume that political gridlock in Washington will get cleared up eventually.?

Why consumer delinquencies are at their highest level since 2020

Delinquency rates on consumer loans last month hit their highest level since the spring of 2020, a potential sign that inflation and rising interest rates are taking a toll on household finances.? Banks are keeping a close watch on delinquency rates, spending trends and credit originations to determine the health of the most powerful driver of the U.S. economy. Consumer spending accounts for about 70% of the country's economic output, and banks and other businesses are eager to find out whether consumer spending will help the U.S. economy avoid a recession in 2024. The share of consumer loans between 30 and 59 days past due rose 0.84% in August, up from 0.65% in August 2022, according to data from VantageScore.?

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