What is shadow IT and why is it a threat to mortgage lender security?

The thought of shadow IT raises goosebumps for some executives overseeing lender IT departments. "Shadow IT is an absolute nightmare," said Arnel Manalo, CISO at Seattle-based Evergreen Home Loans. "The thought of it keeps me up at night because you don't know who's sending data where or who's doing what." Shadow IT, a term which rose to prominence in the past decade, is defined as a tool or process brought in-house without the blessings of an IT department. Tech executives say that improperly incorporating shadow tools can result in breaches and leaked personal identifiable information. These tools also run the risk of being non-compliant with regulations and mirroring solutions that are already approved by a lender, creating financial waste. But this sentiment of fear is not shared by all. Other CIOs and stakeholders in the mortgage industry see shadow IT as a way to propel innovation at origination shops.?

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Housing bubble concerns persist but this is no '08 crash, experts say

Experts today have become reluctant to deny the existence of housing bubbles given widespread monthly home-price declines, and the experience during the Great Recession. Just before that mortgage meltdown that occurred then, several pundits issued varying statements to the effect of "this is not a bubble, this is just local," recalled Gunnar Blix, director, housing market research at Black Knight, during a panel at Information Management Network's Residential Mortgage Servicing Rights conference in New York on Tuesday. "I'm a little wary of becoming that guy," he said. "But I do think it's different from 2008." Home prices are generally now down from their peaks, as reflected by record equity depletion in the third quarter, but in most cases they're still up year-over-year, noted Blix. They're also generally elevated compared to where they were pre-pandemic. That leaves borrowers in many areas with enough of a cushion in home value to continue incentivizing loan repayment, he said.

Mortgage applications increase for first time in 8 weeks

Mortgage application volumes swung higher for the first time in eight weeks, buoyed by lower interest rates that led to a pickup in purchases, according to the latest data from the Mortgage Bankers Association. The MBA's Market Composite Index, a measure of weekly application volume based on surveys of association members, climbed 2.7% higher on a seasonally adjusted basis for the seven days ending Nov. 11. Compared to the same weekly period in 2021, activity came in 68% lower. "Application activity, adjusted to account for the Veterans Day holiday, increased in response to the drop in rates," said Joel Kan, MBA's vice president and deputy chief economist. The conforming 30-year rates saw its largest fall since July, he noted.?But the uptick in new business was limited to the purchase market. The seasonally adjusted Purchase Index, headed upward for a second consecutive week, rising 4% from seven days earlier, but was still down 40% on a year-over-year basis.

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FHA premium cut could offset GSE fee reductions, analysts say

A now-more-than-likely cut in the Federal Housing Administration's mortgage insurance premium could offset any impact of the reduction in the conforming market's loan level price adjustments. This conclusion comes from stock analysts who cover the FHA's competition for high loan-to-value ratio originations, the private mortgage insurers. The Mutual Mortgage Insurance Fund had a capital ratio of 11.11% as of Sept. 30, a report issued on Tuesday said. When it comes to a premium cut, that level of capital "is simply too high to disregard, but our view remains that any future reduction will be modest given concerns regarding the housing market, the economy, and the path to normalization," said Isaac Boltansky of BTIG. During a press call, Federal Housing Commissioner Julia Gordon, while not committing to a premium reduction, said any move would have to wait until after the fiscal year 2023 budget process.

Critics call Federal Home Loan Bank System 'corporate welfare'

Critics of the system are claiming that the banking cooperative is receiving billions of dollars a year in corporate welfare while providing a negligible return to taxpayers in funding affordable housing programs. As the Federal Home Loan banks undergo the first review in nearly 100 years, more critics are suggesting that the 11 regional banks, created by Congress during the Great Depression, should have a mission more closely tied to solving the affordable housing crisis. Joshua Stallings, the deputy director of the Federal Housing Finance Agency, said at a panel discussion on Nov. 2 that the agency will be asking "big questions" about the appropriate role of the FHLB system in addressing affordability, community and economic development, and the needs of rural and vulnerable communities. No topic is off limits, Stallings told seven panelists earlier this month, as the FHFA examines the banks' mission, membership and congressional mandate.

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