The Week Ahead

The Senate returns on July 20 while the House continues its work remotely.

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Party Conventions Now 4 Weeks Away                            

The often heralded, and widely anticipated, quadrennial political party nominating conventions are rapidly approaching. The different approaches to the party conventions speaks volumes to the contrast in candidates.

First up is the Democrat National Convention in Milwaukee, WI being held from August 17-20th. Democrats have labeled their event the “Convention Across America” and have advised that state delegates should not plan to travel; and should conduct their business remotely. The host city will anchor events that include both live broadcasts and curated content from Milwaukee and other satellite cities, locations and landmarks across the country.

Meanwhile, Republicans will gather for business purposes in Charlotte, NC from August 21-24 and then convene for events in Jacksonville, FL from August 24-27 ultimately culminating with the nomination of the Trump/Pence ticket.

The business meetings of each party drive their respective platforms, or governing documents that each party intends to deploy if elected.  In this election, the party platforms contrast significantly in major areas including criminal justice reform, gun control, environment, regulation, heath care, immigration, foreign trade and tax policy.  We are following the key policy differences for housing finance impact.

Labor Market Appears to Stall Following Virus

The US Department of Labor reported that the number of Americans who filed for unemployment benefits rose more than expected last week as the country continues to grapple with the economic impacts of the coronavirus pandemic. 

It was also the 16th straight week in which initial claims totaled at least 1 million. Continuing claims totaled 17.33 million for the week of July 4.

It appears the labor market is following the virus and as infection rates continue to rise, we likely will observe a correlation to jobless claims. As the rate of infection spikes, we are watching for an uptick in CARES Act forbearance requests.

HFSC Holds Hearing on CARES Act Compliance

The House Financial Services Subcommittee on Oversight and Investigations held a virtual hearing this week on mortgage servicers’ implementation of the CARES Act.

The Housing Policy Council represented the industry and we took part in meetings and discussions that produced their prepared testimony.

While the hearing largely followed partisan lines, we do see a remarkable difference in today’s technology and solutions that have enabled a faster start to supporting distressed borrowers impacted by COVID-19 as proscribed by the CARES Act.

In addition, the treatment of COVID-19 impacted borrowers in non-federally-backed mortgage forbearance is also impressive and speaks to lessons learned from the housing crisis.

As hopes for a quick V shape recovery appear for naught, we will be watching forbearance take-up rates closely.

“HPC members are not seeking further forbearance legislation at this time but would instead ask Congress and the Committee to continue to monitor the economic circumstance affecting many Americans and the impact of the public health crisis on housing markets,” said DeMarco.

Digital Collateral at GNMA        

Ginnie Mae published APM 20-10 noting it has begun to implement the policy, technology, and operational capabilities necessary to accept electronic promissory notes and other digitized loan files as collateral for Ginnie Mae securities (Digital Collateral). As part of this initial phase, Issuers may apply to participate as eIssuers and begin securitizing government-backed mortgages comprised of Digital Collateral with Ginnie Mae approval.

Ginnie Mae will begin reviewing applications on a rolling basis beginning on July 20, 2020. If approved, eIssuers and their eCustodian will need to complete a series of test eNote transactions with Ginnie Mae. Upon successful completion of the test transactions, Ginnie Mae will grant written eMortgage Issuance Authority, which will govern and limit the number of eMortgages that may be securitized by that eIssuer during the initial phase of the Digital Collateral Program.

Notarize Sees Revenue Spike in COVID-19 Era

Since the pandemic began, remote online notarization (RON) has helped to bridge the social distancing gap, allowing deals to close without in-person contact, and thereby helping to maintain business continuity.

Making RON a legally acceptable form of documentation went from an issue on the periphery to the law of the land in 28 states as of July 8, with more expected to pass their own regulations in the coming weeks and months.

With this increased RON implementation, Notarize, a Boston-based provider of electronic notary services, said it had a 400% spike in overall revenue during the second quarter.

“Year-over-year, it’s more like 1000%,” Pat Kinsel, CEO of Notarize, said in an interview. The company has added a host of new clients to their roster in the past few weeks, Kinsel said. “We work with two of the top 10 lenders in the country, United Wholesale Mortgage and Guaranteed Rate, other clients that are public like Redfin, Stewart Title, Realogy and others.”

Kinsel predicts business will continue to grow. “A lot of these accounts are doubling with us every month now. I don’t see the growth rates slowing at all over the next six months. If we initially had more notaries, we would have grown even more than that,” he said. “We’ve onboarded about a thousand notaries to the platform in that time period.”

Meeting the new RON certification program requirements include analyzing credentials, borrower identification, maintaining an audio and video recording of the notarization, record storage and audit trails.

Industry proponents who have long sought to get lenders onboard with such technologies are quick to point out how helpful it has been for its early adopters. At the federal level, the SECURE Notarization Act brings the notary process into the 21st century, allowing people to securely complete documents while still following recommended health and social practices amid the coronavirus pandemic.

Faith’s Corner: HMI Rises to Pre-COVID Level

In a strong signal that the housing market is ready to lead a post-COVID economic recovery, builder confidence in the market for newly-built single-family homes jumped 14 points to 72 in July, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

Builders are seeing strong traffic and interest in new construction as existing home inventory remains lean. Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring.  Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.

While the housing market is clearly rebounding, challenges exist. Lumber prices are at two-year highs and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist.

Nonetheless, the important story of the changing geography of housing demand is benefiting new construction.  New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.

All the HMI indices posted gains in July. The HMI index gauging current sales conditions jumped 16 points to 79, the component measuring sales expectations in the next six months rose seven points to 75 and the measure charting traffic of prospective buyers posted a 15-point gain to 58.

HECM: Retail Leads to Two Year High   

HECM endorsements rose dramatically by 214.8% in the month of May 2020, for a total of 5,027 loans according to the latest HECM Originators Report from RMI.

The rise was led by the retail endorsement segment of business, which experienced an increase of 235.5% in May while wholesale levels recorded an increase of 193.4%. The overall increase in endorsements in May was the best monthly total in over two years.

MISMO On Servicing Xfers

MISMO announced it is seeking industry participants to collaborate on a new initiative to facilitate servicing transfers.

Participants will identify and prioritize challenges associated with servicing transfers, with the goal of creating standards and best practices that allow for a more seamless and consistent experience.

MISMO acknowledges that creating a uniform standard for servicing transfers is a large undertaking and that a multi-phase approach is necessary. The first phase will identify current challenges, prioritize the findings, and build a high-level roadmap for developing solutions.

Editor’s note: This is a compilation of industry periodicals (including American Banker, Bloomberg, Mortgage Bankers Association media, Politico and the Wall Street Journal among others) and is intended solely for the use of the addressee and not for further distribution without the sender’s permission.

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