Calabria, New Home Price Index, Equifax Hearing, Fed Comments, and Growth of Wholesale Lending

Some of the topics we're looking at this week

The Senate Banking Committee voted in support of Mark Calabria to be the new Director of the FHFA. Mortgage Media reported this vote shortly after it happened, and we expect it to be just a short few weeks before full senate approval.

Case Shiller released its new home price index. While we continue to read stories suggesting a slowing of home values in certain markets across the county, the year-over-year index still suggests stable growth. David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, concurs by saying: “Even at the reduced pace of 4.7% per year, home prices continue to outpace wage gains of 3.5% to 4% and inflation of about 2%.” Mortgage Media continues to keep an eye on the challenges for first-time prospective homebuyers in their search for an affordable home.

House Financial Services Chairwoman Maxine Waters held a full Committee hearing this week entitled, “Who’s Keeping Score? Holding Credit Bureaus Accountable and Repairing a Broken System”. In focus was the protection of data and the lack of competition in the credit modeling marketplace. The testy back and forth with the CEO of Equifax on the still-raw wound surrounding the data breach highlights to MM that we should expect legislative efforts going forward.

“The Equifax data breach response is far from over,” said Jaret Seiberg, an analyst for Cowen Washington Research Group. “There will be more legislation in the next two years that impacts Equifax and the other credit bureaus.”

Some members of the committee believe that the control of credit reporting amongst three major bureaus contributes to these outcomes, with one member calling this structure an “oligopoly”. We will be closely watching this debate in the months ahead.

We joined many who watched the comments from the federal reserve in testimony this week.

“The U.S. economy remains strong, but dangers are brewing”, Federal Reserve Chairman Jerome Powell told a Senate committee Tuesday. The markets responded by fluctuating during the hearing. “While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals,” Powell said in his prepared remarks.

He referenced uncertainty in the US economy and concerns in Europe and Asia and pledged that the Fed would monitor the markets stating, “We will carefully monitor these issues as they evolve” pledging that they were poised to respond. With questions about quantitative tightening, decisions related to the massive holdings of MBS, and the steps ahead in this unusual time, we are watching closely as all of this will have ramifications to the mortgage and housing markets. The ten-year closed just under 2.60 down, well off the 52 week high of 3.25.

Finally, Mortgage Media continues to watch both the growth of wholesale lending and product expansion associated with it. With extremely competitive pricing for mortgage brokers as some of the largest wholesale lenders are waiving add on fees and offering price-match guarantees, we continue to watch the re-emergence of the mortgage broker, and wonder how much growth will occur in this segment in the year ahead.

David Lykken, the well known pundit, in a recent podcast interview with Mortgage Media suggested that the trend in mortgage broker expansion was likely to continue, arguing that this might be a survival strategy for some current IMBs looking to shed the overhead of their current operations. Whether true or not, we watched the emergence this week of non-prime lender Angel Oak expanding into wholesale – something that will improve product availability for mortgage brokers. With margin compression, high fixed costs, and fierce competition, Mortgage Media will be paying close attention to specific lending industry segments and business models as we move through 2019.