Mortgage Market Update - "Confirmation Bias" - LLPA Perspective (recap May 15-21, 2023)

If the numbers never lie, then the devil is in the details.?It is easy to slice stats enough to say what you want to hear or read a headline and see exactly what you wanted to say.?Confirmation bias is an easy and tempting trap, especially in real estate.?In this week's newsletter,?I share a few very important headlines along with a funny example of how I tripped into the confirmation bias trap at the symphony this weekend.?I also share how well-informed context and perspective can combat even the most tempting confirmation bias traps—similar to those we saw dominate the headlines following the FHFA adjustments to pricing for #rates and fees, based on a borrower's #creditscore and #downpayment (the LLPA adjustments).

• #Mortgage origination volume sinks to nine-year low during first quarter.
• Adjustments to how rates and fees are calculated based on #credit and down payment (LLPA adjustments) grabbed the sensational headlines, but the proposed risk-based pricing changes—based on debt-to-income (DTI) ratios—were far more troubling to most well-informed #realestate professionals.??DTI can change based on a variety of figures that get updated throughout the process (insurance, taxes, liabilities, etc.).?FHFA rescinded the controversial DTI-based fees after months of advocacy efforts.
• After rescinding the proposed changes to DTI-based fees,?FHFA announced that they will also seek industry further feedback on "the goals and policy priorities that FHFA should pursue" in overseeing pricing.
• A group of real estate trade organizations has come together for a joint amicus brief urging the?#SupremeCourt to be prudent in considering an upcoming ruling on the constitutionality of the Consumer Financial Protection Bureau (CFPB).?#Realestate professionals fear that the ruling could risk 'immediate and intense disruption' to housing.

The kids slept at Grandma and Grandpa's this weekend.?The next morning we picked them up and joined Grandma and Grandpa to see the Plymouth Symphony Orchestra play Beetles songs.?The concert was awesome!?But, I get a head of myself, because on the way there Ryan asks,?"How come there are so many old people in Plymouth? Everyone is a grandma or grandpa."?We tried to explain that it isn't any different than where we live, and that?Grandma and Grandpa's neighborhood has a mix of people of all ages, but it is also a really a nice place for grandparents to live...?

Then, we arrived at the symphony.?I saw the crowd and as the cover to an AARP magazine inched their way into symphony hall, I knew it didn't help my case.?Ryan catches up to me and exasperated with an era of I told you gives an aggressive gesture to the crowd…

Confirmation bias is a daily issue, but we cannot read every headline or #housing stat as printed fact.?It is always important to apply context and perspective.?On the latest episode of my #realestatepodcast ("Finance with Factor") I discuss why the headlines about #llpa adjustment?(claiming that "less qualified buyers getting better rates and fees than higher credit score and higher down payment borrowers") are missing the most important details.??I try to apply the much needed context and perspective to help you understand the changes—and opportunities within the new pricing models.?I also discuss the repeal of the proposed DTI based pricing?(noted above) and why repealing these fees is such great news for?all?economy, home buyers, and real estate professionals.?

I encourage everyone to take a few mins and?listen to last week's episode.?While you are there, please like, subscribe/follow "Finance with Factor" everywhere you enjoy podcasts.?To be clear, there is no profit to be made, I just enjoy learning from new guests on new topics every week—and I do my best to amuse myself and make you smile with me along the way.

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