new house subcommittee considers consolidating the rural … · 2019. 12. 9. · house subcommittee...
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House Subcommittee Considers Consolidating the Rural Housing Service
MAY 21, 2015
Earlier this week, the House Financial Services Subcommittee on Housing and Insurance held a hearing
examining the Rural Housing Service (RHS) and the role it plays in the single-family mortgage market.
During the hearing, Subcommittee members debated the findings of a 2012 Government Accountability
Office (GAO) report that suggested that RHS's single-family lending programs be consolidated with
similar programs administered by the Federal Housing Administration (FHA). The witnesses at the
hearing were Tony Hernandez, the Administrator of RHS, and Mathew Scire, the Director for Financial
Markets and Community Investment at GAO.
During his opening statement, Subcommittee Chairman Blaine Luetkemeyer (R-MO) highlighted the
importance of programs serving rural America's affordable housing needs. Luetkemeyer said that, as a
representative from district with a large rural area, he sees the impact programs like RHS make on rural
communities first-hand. Luetkemeyer indicated that he appreciated GAO's report calling for
consideration of consolidating USDA and FHA programs and said he would like to see RHS "streamlined."
Subcommittee Ranking Member Emanuel Cleaver (D-MO) echoed Rep. Luetkemeyer's sentiment for
streamlining RHS in his opening statement. Cleaver also voiced concern about the funding levels for
RHS. He stated that there is a way to improve RHS without cutting its budget and argued that he would
like to see the budget increased for programs serving rural America’s housing needs.
Hernandez defended the RHS' single-family programs in his opening statement, arguing that there is not
significant overlap between USDA and FHA programs. Many of the customers who receive mortgages
through RHS, Hernandez claimed, do not qualify for similar FHA products. Hernandez highlighted the
changes RHS has made to streamline its single-family lending program, including the automation process
RHS has recently completed, which he said will save the agency roughly $5 million in administration
costs per year.
Hernandez also said RHS is pursuing legislative proposals that he feels will improve the program.
Hernandez said he wants RHS to delegate loan approvals to its lenders, emulating the way FHA currently
handles loan approvals. He also advocated for congressional approval to charge a $50 user fee to cover
the costs of maintaining and improving RHS' underwriting technology. Throughout the hearing,
Hernandez mentioned that RHS does not cost taxpayers any money and has never required a taxpayer-
funded bailout.
Scire refuted many of Hernandez's claims in his opening testimony. Specifically, Scire said the GAO
found that 74 percent of FHA borrowers meet RHS product requirements, though he did acknowledge
that there would be some borrowers who would be unable to receive federal mortgage assistance if RHS
were rolled into FHA. Hernandez and Scire went back and forth throughout the hearing about what
borrowers RHS serves multiple times.
Committee Ranking Member Maxine Waters (D-CA) pressed both Hernandez and Scire for a direct
answer on how consolidation would benefit RHS and FHA. Hernandez responded that he does not see
the benefit for RHS to consolidate with FHA, which pleased Waters. Scire said he feels Congress should
seriously consider GAO's recommendation to consolidate RHS and FHA. Waters pressed Scire for facts
to back up his consolidation recommendation, which Scire was unable to produce during the hearing.
Luetkemeyer ended the hearing with a set of pointed questions for Hernandez regarding RHS staffing
levels. Luetkemeyer said FHA endorsed $786.2 billion in single-family loans in fiscal year 2014, while
RHS endorsed $19 billion in single-family loans the same year. Luetkemeyer stated that the total
number of RHS staff is roughly double the number of FHA staff. He expressed his strong desire for RHS
to be "innovative" and cut their staffing levels to the same as FHA.
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Shelby finance bill clears Senate panel
05/21/15
The Senate Banking Committee approved a financial overhaul package on a 12-10 vote Thursday, but
without support from moderate Democrats seen as crucial to the sweeping proposal’s clearing the
upper chamber.
The vote was split along party lines, with Republicans arguing the legislation would provide regulatory
relief to boost the economy and Democrats saying it will weaken the 2010 Dodd-Frank Wall Street
reform law.
The tally indicates that the bill’s author, Committee Chairman Richard Shelby (R-Ala.), will have a hard
time clearing 60-vote procedural hurdle generally needed to get a floor vote in the Senate.
After the hearing, however, Shelby didn't seem worried and signaled he was looking to continue
negotiations throughout the summer.
"This is Round One," Shelby said with a smile. "It's a good start. We've raised the level of debate on this
and there are four, five, six Democrats that might be able to work with us on this on the committee. This
is the beginning of some serious negotiations."
He said it was "not a routine piece of legislation" because of the bill's economic impacts.
"We're not trying to get cloture right now," he said. "We're moving to the second step to have some
serious negotiations."
The legislation has sparked intense interest from the financial community because it is the most
aggressive overhaul since Congress passed Dodd-Frank, a landmark statute enacted in response to the
2008 economic crisis.
Shelby's bill would ease regulations on community banks and credit unions, while broadening the
definition of smaller banks eligible for exemptions from Dodd-Frank. It would also seek to reform the
Federal Reserve by shifting power to its regional banks.
Sen. Sherrod Brown (Ohio), the panel's top Democrat, railed at the bill during the hearing as a "one-
sided [industry] wish list — pleasing to various interest groups but lacking any provisions to help the
average American trying to navigate our financial system."
After the hearing, Brown advocated for a more piecemeal regulatory relief approach, saying he hoped to
move legislation easing the burdens facing community banks that have widespread bipartisan support.
The community banking industry has argued since Dodd-Frank passage that the rules for big banks
should not be applied to their institutions.
"We start with community banks, we should do where there is consensus, move quickly because the
other [issues] will take longer, so we can get something out in the spring still before summer and get it
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signed by the president," Brown said. "And then let's sit down and talk about" the other issues, such as
Fed reform.
After the hearing, Sen. Bob Corker (R-Tenn.), a committee member, said, "obviously there won't be a
vote on it in its current form."
"But hopefully between now and that time it'll change enough to where it will," Corker said.
Sens. Mark Warner (D-Va.) and Heidi Heitkamp (D-N.D.) — two moderates Shelby could need to build
support for the bill — took Shelby to task during the hearing for his negotiations, reiterating claims that
Shelby didn't work with Democrats in putting together the proposal.
"I have been more upset by this process than anything I’ve been involved with in the entire United
States Senate," Warner said during the hearing.
Shelby refuted those reprovals: "At the staff level, the process has included more than 40 bipartisan
staff meetings, briefings and conference calls to discuss each issue and a possible way forward."
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Fannie and Freddie set new financial rules for mortgage servicers and sellers
Specifically targets nonbanks
May 20, 2015
In January, Fannie Mae and Freddie Mac announced a proposal for new minimum financial
requirements for mortgage sellers and servicers that do business with the government sponsored
enterprises, specifically targeting nonbanks.
Now, Fannie and Freddie are making those new rules official. The Federal Housing Finance Agency
announced Wednesday that Fannie and Freddie are officially issuing new operational and financial
requirement for all current and potential sellers and servicers that do business with the GSEs.
Under the new rules, all seller and servicers will be required to have a minimum net worth base of $2.5
million plus 25 basis points of the total unpaid principal balance for the loans each nonbank services.
Additionally, the new rules will also require that nonbanks must maintain a minimum capital ratio of
tangible net worth greater than or equal to 6% of the nonbank’s total assets.
The GSEs are also stating additional minimum liquidity requirements for nonbanks, including: 3.5 basis
points of total agency servicing (Fannie Mae, Freddie Mac, and Ginnie Mae) and incremental 200 basis
points of total non-performing agency servicing in excess of 6% of the total Agency servicing unpaid
principal balance.
The FHFA stated that the new operational requirements will become effective no later than Sep. 1,
2015 and the financial requirements will become effective Dec. 31, 2015.
"These updated operational and financial requirements will help mitigate risks associated with changes
in the servicing industry," FHFA Director Mel Watt said of the new rules. "Strengthened enterprise
servicer counterparty standards should also improve access to credit and protect taxpayers by reducing
market uncertainty about the enterprises' expectations for mortgage servicer counterparties."
For all depository institutions, all sellers and servicers must maintain a minimum net worth $2.5 million
plus a dollar amount equivalent to 25 basis points of the unpaid principal balance of all mortgages
secured by 1- to 4-unit residential properties that it services directly, regardless of whether the
mortgages are owned by the servicer or by a third-party investor.
In a statement, Joy Cianci, senior vice president for credit portfolio management at Fannie Mae, said
that Fannie will “work closely with servicers to make sure they have a clear understanding of the
requirements and continue to be strong counterparties for Fannie Mae.”
Cianci said that Fannie Mae sellers and servicers must implement the operational requirements by Sep.
1, 2015, and the financial eligibility changes by Dec. 31, 2015.
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Dave Lowman, the executive vice president of single-family business at Freddie Mac, said that the rules
recognize the expanding position of nonbanks in the industry.
"The new seller/servicer eligibility standards announced today incorporate the lessons of the recent
housing crisis and reflect the expanding role of non-bank servicers in the mortgage industry,” Lowman
said.
“These new standards are intended to improve the customer experience for borrowers and mortgage
investors alike by establishing common-sense servicing benchmarks for operational efficiency and
financial strength,” Lowman continued. “Today's announcement underscores Freddie Mac's
commitment to work with the Federal Housing Finance Agency and other stakeholders to continually
improve America's mortgage finance system."
Lowman said that Freddie sellers and servicers must be in compliance with the new operational
standards on Aug. 18, 2015 and the revised financial standards on Dec. 31, 2015.
“In response to changes taking place in the servicing industry, FHFA directed Fannie Mae and Freddie
Mac, as part of their 2014 and 2015 Conservatorship Scorecards, to update their counterparty standards
for mortgage servicers,” the FHFA said in a statement. “The new requirements are intended to help
ensure the safe and sound operation of the enterprises and provide greater transparency, clarity and
consistency to industry participants and other stakeholders and reflect feedback received over the past
several months.”
Michael Stegman to Become President's Top Housing Advisor
MAY 20, 2015
The Obama Administration announced today that Michael Stegman will join the National Economic
Council (NEC) this week as its top housing official. In this role, Stegman will be the White House’s top
advisor on housing policy.
Stegman has worked the last four years at the U.S. Department of Treasury, where he serves as
Counselor to the Secretary for Housing Finance Policy. At Treasury, Stegman has been involved in a
number of critical housing issues and spearheaded the department’s housing finance reform efforts.
NCSHA worked very closely with Stegman on a number of initiatives involving HFAs. Stegman also spoke
to HFAs and their partners at several NCSHA events, most recently NCSHA’s 2015 Legislative Conference
in March.
Stegman will replace Seth Wheeler, who has been with NEC for two years and who previously worked
for Treasury and the Federal Reserve. Wheeler will leave the White House next month. In his various
federal roles, Wheeler has worked closely with NCSHA to develop policies that would aid HFAs’ efforts
to fulfill their affordable housing mission. At Treasury, Wheeler played an integral role in developing the
Obama Administration’s HFA Initiative. Wheeler consistently sought input from NCSHA and HFAs on key
housing issues and met with HFA executive directors at several NCSHA events.
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Shelby Releases Draft of Regulatory Reform Bill
May 18, 2015
Senate Banking Committee Chairman Richard Shelby, R-Ala., yesterday released a discussion draft for his
long-anticipated regulatory reform legislation.
The Financial Regulatory Improvement Act of 2015
(http://www.banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=0a1162a8-e8f0-
44c3-9828-b7ff7d2192ea), which Shelby called a “starting point” for further negotiation, borrows
heavily from earlier House and Senate bills that gained bipartisan support. It proposes, among other
provisions, to prohibit Congress from using credit guaranty fees for purposes other than GSE business
functions; provides a legal “safe harbor” for most banks from federal mortgage underwriting standards;
provides additional congressional supervision of the Federal Reserve Board; and changes how regulators
supervise banks and nonbanks.
“This discussion draft is a working document intended to initiate a conversation with all members of the
Committee who are interested in reaching a bipartisan agreement to improve access to credit and to
reduce the level of risk in our financial system,” Shelby said. “I look forward to engaging with members
of the Committee on specific proposals in the discussion draft.”
Mortgage Bankers Association President and CEO David Stevens said the bill "attempts to answer some
of the more difficult questions facing the real estate finance industry today with a variety of modest, but
important, changes that will help the housing market expand for more qualified borrowers. I would
hope that both Democrats and Republicans would be able to come together and support key
components of this legislation.”
A summary of key sections of the draft appear below:
• Prohibition on Use of Guarantee Fees to Offset Other Government Spending. Prohibits use of increases
in a guarantee fee charged by Fannie Mae and Freddie Mac to offset outlays or reductions in revenues
for any purpose other than enterprise business functions or housing finance reform as passed by
Congress in the future.
• Limitation on Sale of Preferred Stock. Prohibits sale or other disposition of preferred stock in Fannie
Mae or Freddie Mac by the U.S. Treasury unless directed to do so by Congress.
• Secondary Market Advisory Committee. Instructs the Federal Housing Finance Agency director to
establish a committee of mortgage market participants to advise on decisions pertaining to the
development of market infrastructure.
• Common Securitization Platform. Directs the FHFA director to: (1) report to Congress annually on
development of the Common Securitization Platform; (2) establish a board of directors of CSP to advise
on development and transition of the CSP; and gradually increase the number of CSP board members
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who do not work for Fannie Mae or Freddie Mac; and (3) after five years, transition the CSP to a non-
profit entity available to approved issuers other than Fannie Mae and Freddie Mac.
• Mandatory Risk Sharing. Establishes minimum annual levels of required risk sharing that must be at
least 150 percent of the previous year’s level, at least half of the total amount of which must be front-
end risk sharing. The FHFA director and the Secretary of the Treasury may delay these requirements for
up to one year if their imposition would adversely affect the housing market.
• Exception to Annual Written Privacy Notice Requirement. Amends the Gramm-Leach-Bliley Act to
exempt from its annual written privacy policy notice requirement any financial institution that: (1)
shares nonpublic personal information only in accordance with specified requirements, (2) has not
changed its policies and practices with respect to disclosing nonpublic personal information from those
disclosed in the most recent disclosure sent to consumers, and (3) otherwise provides customers access
to the most recent disclosure in electronic or other form permitted by specified regulations.
• Allows Privately Insured Credit Unions Authorized to Become Members of a Federal Home Loan Bank.
Amends the Federal Home Loan Bank Act to treat certain privately insured credit unions as insured
depository institutions for the purposes of determining eligibility for membership in a federal home loan
bank.
• Examination Ombudsman. Establishes in the Federal Financial Institutions Examination Council an
Office of Examination Ombudsman, charged with receiving and investigating complaints from financial
institutions, representatives of financial institutions or any other entity acting on behalf of the
institutions, concerning examinations, examination practices or examination reports.
• Confidentiality of Information Shared between State and Federal Financial Services Regulators.
Amends the S.A.F.E. Mortgage Licensing Act of 2008 to extend access to any information provided to the
Nationwide Mortgage Licensing System and Registry to State and Federal regulatory officials having
financial services oversight authority, without the loss of privilege or confidentiality protections
provided by Federal and State laws.
• Safe Harbor for Certain Loans Held in Portfolio. Provides Qualified Mortgage protection for creditors
holding a mortgage in portfolio so long as certain criteria are met.
• Protecting Consumer Access to Mortgage Credit. Amends the Truth in Lending Act to exclude from the
computation of points and fees an escrow for future payment of insurance. This section also requires
the GAO to study the impact of Dodd-Frank mortgage rules on the availability of mortgage credit,
including the impact on affiliated lenders.
• Protecting Access to Manufactured Homes. Amends the Truth in Lending Act to exclude from the
definition of “mortgage originator” any employee of a retailer of manufactured homes who does not for
compensation or gain take residential mortgage loan applications, and to revise the definition of “high
cost mortgage” as it applies to manufactured housing.
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• Study on Privacy Risks of Government Publication of Personal Financial Data. Requires the GAO to
study the privacy risks of new Home Mortgage Disclosure Act reporting requirements added by Dodd-
Frank.
• Ensuring Reporting of Appraisal Misconduct. Provides persons involved in a real estate transaction
with protection against defamation suits when reporting appraisal misconduct.
• Clarifying Applicability of Section 619 of Dodd-Frank. Amends Section 13 of the Bank Holding Company
Act to exempt from the Volcker Rule banks with $10 billion or less in assets and those with a holding
company with less than $10 billion in assets, as such threshold shall be adjusted for GDP growth.
• Study of Mortgage Servicing Assets. Requires federal banking agencies to perform a study of the
impact of the recent changes in the regulatory treatment of mortgage servicing assets.
• No Wait for Lower Mortgage Rates. Removes the new three-day wait period required for the
combined TILA/RESPA mortgage disclosure if the only change from the prior disclosure is a reduction in
the consumer’s interest rate; Provides lenders with a safe harbor from liability until the Consumer
Financial Protection Bureau certifies that use of the forms does not conflict with state law.
• Eliminating Barriers to Jobs for Loan Originators. Allows an individual who is employed by a financial
institution and a registered loan originator to continue to originate loans for 120 days after being
employed by a state-licensed non-depository entity.
• FHLB Membership Proposed Rule. Requires the Federal Housing Finance Agency to withdraw its
September 2014 proposed rule, Members of Federal Home Loan Banks.
• Nonbank Determinations. Provides greater transparency to the Financial Stability Oversight Council
designation process and allows regulated entities to address risks and concerns identified by FSOC.
• Federal Reserve Reports to Congress. Replaces the current semi-annual monetary policy reports to
Congress by the Federal Reserve Board with a quarterly report published by the Federal Open Market
Committee, containing a more detailed analysis of recent, current, and future economic conditions and
trends (while still requiring the Chair of the Federal Reserve to testify semi-annually and not quarterly).
• Commission for Restructuring Federal Reserve System. Creates an independent commission to study
potential restructuring of districts of the Federal Reserve System.
• Federal Reserve Study on Nonbank Supervision. Requires the Federal Reserve to conduct a study and
prepare a report to Congress every two years (with a sunset after 10 years) on its plan to regulate and
supervise nonbank institutions.
• Federal Reserve Bank Governance. Requires the president of the New York Federal Reserve Bank to
be appointed by the President and confirmed by the Senate due to the unique role of the Federal
Reserve Bank of New York in the Federal Reserve System.
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A complete section by section look at the discussion draft can be found at
http://www.banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=6139c689-ace8-
4fd6-8927-3b1f97c15a19.
Shelby originally planned for a markup of the discussion draft for next Thursday, May 21, but following
objections by Banking Committee Democrats, who said they had not received a copy of the draft,
postponed the markup to a later date to be determined.
This chart shows changes in where consumers want to borrow
It’s not how it used to be
May 14, 2015
Consumers are changing who they borrow from to finance the big purchases in their lives, like buying a
home or car.
In light of its latest initiative to become the No. 1 nonbank consumer lender, loanDepot created an
infographic to show how much demand for unsecured personal loans has grown.
Marketplace personal loans only reached $1.2 billion in 2012. In comparison, just two years later,
demand surged to $8.8 billion in new loans.
Meanwhile, parents who will take out a personal loan to help their Millennial-age children buy a home
is projected to significantly increase, growing to 8% in the next five years, compared to 3% in the past
five years.
"Support from parents is playing a significant role in the housing recovery, and this new research
indicates the trend will increase," said Dave Norris, president and chief operations officer at loanDepot.
http://www.housingwire.com/ext/resources/images/editorial/BS_ticker/PDF/April-
2015/InfoGraphic.jpeg
FHFA Issues Update on the Single Security
5/15/2015
Washington, DC – The Federal Housing Finance Agency (FHFA) today released An Update on the
Structure of the Single Security. The Update details progress that has been made on the single
mortgage-backed security that would be issued by Fannie Mae or Freddie Mac. Developing the Single
Security is a key goal of FHFA's 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie
Mac. Finalizing the structure of the Single Security is a 2015 Scorecard item for both companies and for
Common Securitization Solutions, LLC (CSS), the joint venture between Fannie Mae and Freddie Mac
that is advancing the work on this project.
The Single Security project is intended to improve the overall liquidity of Fannie Mae and Freddie Mac
mortgage-backed securities, and lower costs for borrowers and taxpayers. Last year, FHFA issued a
Request for Input on all aspects of a proposed structure for the Single Security. This Update contains
FHFA's decisions based on careful consideration of the responses and further dialogue with industry
stakeholders. These decisions are generally consistent with the proposal set forth in the Request for
Input.
"While the Single Security remains a multi-year initiative, we believe this Update represents another
significant milestone we have reached in defining the structure and processes necessary to transition
successfully to a Single Security," said FHFA Director Melvin L. Watt. "Our objective is to continue to
make progress on building a new securitization infrastructure for Fannie Mae and Freddie Mac that is
adaptable for use by other secondary market participants in the future. FHFA therefore invites
additional feedback on the decisions about the Single Security structure described in this Update," Watt
said.
Interested parties may submit additional input electronically via FHFA.gov, or to the Federal Housing
Finance Agency, Office of Strategic Initiatives, 400 7th Street, S.W., Washington, DC 20024. All
submissions received will be made public and posted to FHFA's website.
Link to An Update on the Structure of the Single Security
http://www.fhfa.gov/AboutUs/Reports/ReportDocuments/Single%20Security%20Update%20final.pdf
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan
Banks. These government-sponsored enterprises provide more than $5.6 trillion in funding for the U.S.
mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on
Twitter @FHFA, YouTube and LinkedIn.
Contacts:
Media: Corinne Russell (202) 649-3032 / Stefanie Johnson (202) 649-3030
Consumers: Consumer Communications or (202) 649-3811
Moody’s: Falling delinquencies bolster single, multifamily HFA portfolios
Two reports show delinquencies down
May 15, 2015
Both single-family and multifamily portfolios securing housing finance agency bonds showed significant
improvement in delinquency rates, Moody’s Investor Service says in two new reports.
Following a decade of steady increases in single-family delinquencies, foreclosures have waned by 17%.
Combined with a 9% drop in 60 days+ delinquencies, year-end 2014 saw a 9% decline in total
delinquencies. This indicates new strengthening in these HFA loan portfolios and slower rates of
foreclosures and potential loan losses.
“We expect continued improvement in HFA single-family portfolio performance buoyed by improving
unemployment numbers and the upward movement of median home prices, helping homeowners faced
with negative equity in their homes,” Moody’s AVP – Analyst Eileen Hawes says in the first report,
“Strongest Rebound in HFA Single Family Delinquencies in 10 Years.”
Moody’s also says multifamily loan delinquencies fell to new lows of 0.30% from 0.50% over the past
three years, which contributed to the strong performance of these loan portfolios and supported
increasing credit enhancement.
Moody’s says a healthy national rental market will continue to support the solid performance of the
multifamily portfolios, with vacancies projected to remain below 5% over the next five years.
“In 2014, only two HFAs reported losses on REO sales with losses totaling $25.6 million (0.15% of current
outstanding principal) over the prior five years which is a slight improvement over 2013 levels of $25.8
million. We attribute this strong performance to the asset management strategies utilized by housing
finance agencies,” Moody’s Analyst Richard Kubanik says in “HFA 2014 Multifamily Medians Reflect
Strong Rental Markets Nationwide.”
Despite the solid 2014 multifamily performance, loans in foreclosure, workout or real estate owned
have increased to 0.71% from 0.48% of outstanding loans, but still remain low overall.
Similarly, seven state HFAs are struggling with elevated single-family delinquencies with reported total
delinquencies of over 10% for nine programs as of December 31.
The programs account for roughly 27% of the total loans in the HFA portfolios, and while elevated, the
overall number of programs has fallen from 11 as of December 31, 2013. A primary factor for the higher
delinquency levels revolves around the time needed to process a foreclosure.
HUD and USDA Adopt Minimum Energy Standards for Housing Programs
MAY 12, 2015
Last week, the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of
Agriculture (USDA) issued a Notice of Final Determination that establishes minimum energy standards
that newly-constructed housing units must meet to be eligible for insurance through various HUD and
USDA programs.
The Energy and Independence and Security Act of 2007 (EISA) requires both HUD and USDA to adopt
specific new minimum energy standards as long as the agencies determine that implementing such
standards will not negatively affect the affordability and availability of certain HUD- and USDA-assisted
housing. Specifically, EISA requires that the two agencies adopt the 2009 edition of the International
Energy Conservation Code (IECC) for single-family homes and the 2007 edition of the American Society
of Heating, Refrigerating, and Air-conditioning Engineers (ASHRAE) 90.1 for multifamily buildings. The
notice makes it clear that the agencies believe that adopting these standards will not substantially
reduce the availability of affordable housing through their programs.
The standards put into effect by the notice will apply specifically to newly constructed housing that is
insured through the Federal Housing Administration’s (FHA) single-family and multifamily insurance
programs, USDA’s Section 502 Guaranteed Home Loan program, and the HOME program.
Manufactured housing loans are exempt from these requirements. The new standards will also not
apply to units receiving support programs that have already adopted building codes that meet or exceed
the ERISA standards, including the Public Housing Capital Fund, Section 811 Supportive Housing, and the
Choice Neighborhoods initiative. Also exempt from the new standards is housing constructed through
the Community Development Block Grant (CDBG) and Housing Choice Vouchers programs, which are
not specifically mentioned in ERISA.
The new energy standards will take effect immediately for the HOME program. For FHA’s multifamily
programs, the standards will apply to all properties that file a pre-application for FHA insurance four
months after the Notice was published in the Federal Register (May 6). The new standards will apply to
single-family homes that have their building permit issued at least seven months after the Notice was
published.
While the Notice implements the policy nationwide, the agencies expect that its actual impact will be
much smaller, because most states have already adopted these standards. Currently, all but 16 states
have adopted the single-family IECC standards and all but 13 states have adopted the multifamily
ASHRAE standards. Further, in some of the states that have not adopted the standards, a substantial
number of municipalities have. A list of states potentially impacted by the new standards can be found
in a fact sheet HUD and USDA put together on the new standards.
Based on their 2011 production data, HUD and USDA estimate that the new standards will affect 3,200
multifamily units and 15,000 single family units per year. The agencies also expect the new standards to
be cost-effective, projecting that annual energy savings generated by the new standards will cover the
up-front costs in just over five years.
Worst-Case Housing Needs High Despite Short-Term Improvement
Posted: 5/8/2015
HUD recently released the full version of its Worst Case Housing Needs: 2015 Report to Congress
following the release of its summary findings in early February. This is the 15th report in a biannual
series that HUD prepares for Congress to discuss trends in and causes of worst case housing needs.
HUD defines worst case housing needs as renters with very low incomes (below 50 percent of Area
Median Income) who do not receive government housing assistance and who either spend more than
half of their income on rent, live in severely inadequate conditions, or face both of these challenges. In
2013, the vast majority of households with worst case housing needs had severe housing cost burdens,
while 3 percent lived in severely inadequate conditions.
According to the report, worst case housing needs fell from a record-breaking 8.8 million in 2011 to 7.7
million in 2013. This 9 percent decline is in part due to the economic recovery. However, the report
stresses that worst case housing needs remain 50 percent higher than in 2003. Worst case housing
needs affect very low-income renters across racial and ethnic groups, household structure, as well as
location.
The report concludes that worst case housing needs result from a shortage of affordable rental housing.
While the total supply of rental units increased 2 percent between 2011 and 2013, it was not enough to
keep pace with the increase in the number of renter households, which went up by nearly 4 percent.
This is especially concerning for low-income households that must compete for a small stock of
affordable rental units. In 2013, there were only 65 affordable units available per 100 very low-income
renters, and only 39 units available per 100 extremely low-income renters. The report underscores the
importance of housing assistance to combating worst case housing needs. Yet, approximately only one-
in-four very low-income households receive some form of rental assistance nationwide.
FHFA: HARP now extended through 2016
Brena Swanson
May 8, 2015 3:40PM
The Federal Housing Finance Agency officially announced that the deadline for the Home Affordable
Refinance Program has been extended to the end of 2016, matching the deadline of the Home
Affordable Modification Program.
“Although the number of new borrowers entering these two programs continues to decline, in part
because many eligible borrowers have already taken advantage of them and in part because of
recovering house prices, lenders and servicers are continuing to approve new HAMP modifications and
HARP refinances,” FHFA Director Mel Watt said at the Greenlining Institute’s 22nd Annual Economic
Summit in Los Angeles.
“Extending HAMP and HARP through the end of 2016 will provide real relief for borrowers who
continue to face challenges either paying their mortgage or refinancing their loan,” Watt said.
So far, nearly 3.3 million borrowers have already taken advantage of HARP to reduce their monthly
payments and obtain some financial relief.
Both HAMP and HARP were originally launched in 2009 to provide relief to borrowers by lowering their
monthly payments and were set to expire on Dec. 31, 2013.
However, in June 2014, U.S. Treasury Secretary Jacob Lew announced several initiatives designed to
spur the flailing housing market, including the extension of HAMP until Dec. 31, 2016.
“This innovative program has provided relief to homeowners across the country, including more than a
million homeowners who have been able to permanently modify their mortgages through HAMP and
save roughly $540 a month in mortgage payments," Lew said at the time of the announcement. “The
Making Home Affordable Program is not just helping families keep their homes, it is giving families
peace of mind.”
Back in 2013, the Department of Housing and Urban Development teamed up with the Treasury
Department to announce an extension of the Obama administration’s Making Home Affordable Program
through Dec. 31, 2015.
The then deadline was determined in coordination with the FHFAto align with extended deadlines for
the Home Affordable Refinance Program and the Streamlined Modification Initiative for homeowners
with loans owned or guaranteed by Fannie Mae and Freddie Mac.
As a result, after the second announcement of a HAMP extension in June 2014, it was rumored that
HARP would be extended as well, since the FHFA did just that when both programs were extended for
the first time in 2013.
Once again, talks quickly spread on the potential of a HARP extension after a town hall meeting on the
Home Affordable Refinance Program in Newark, New Jersey, in March 2015.
Watt once again put an end to the rumors, explaining the next day that what he was saying is that the
FHFA doesn’t like to leave any option off the table, but that didn't mean that the agency was in any talks
to pursue either an extension or expansion, just that anything was possible.
And possible just became reality.
While this will be the last time HAMP will ever be extended, there is still a chance that HARP could be
revived.
“HAMP and HARP were never intended to be permanent programs. As a result, this will be the final
extension that FHFA will make for the Enterprises’ participation in HAMP and we anticipate that this will
also be the final extension for HARP,” Watt said.
“FHFA will use the time between now and the end of 2016 to consider how best to build on the lessons
of HAMP for 2017 and beyond. In the meantime, we have determined that it is appropriate to maintain
the Enterprises’ streamlined modification program as part of their loss mitigation toolkit,” he continued.
Last year, Watt started a nationwide public campaign to visit targeted cities with the highest number of
in-the-money borrowers who have yet to take advantage of a HARP refinance in order to help spur
participation.
According to an interactive map on the FHFA’s website, there are more than 600,000 borrowers
nationwide who would still benefit from HARP
Congress Adopts Concurrent Resolution on FY 2016 Budget
MAY 07, 2015
For the first time in six years, both houses of Congress have adopted a concurrent budget resolution—
the final product of negotiations between the Senate and House on their respective budget resolutions
released earlier this spring. The Concurrent Resolution on the Fiscal Year (FY) 2016 Budget
(S.Con.Res.11) outlines the chambers’ Republican policy priorities, aims to eliminate the deficit over the
next decade with more than $5 trillion in spending cuts without raising taxes, adheres to the FY 2016
discretionary spending caps imposed by the Budget Control Act of 2011 (BCA), and includes procedural
language that could be used to repeal the Affordable Care Act.
The House adopted S. Con. Res. 11 on April 30, by largely a party-line vote of 226 to 197. Fourteen
Republicans joined all Democrats in the House to oppose the budget agreement. The Senate followed
suit on May 5, passing the budget by a vote of 51 to 48. No Senate Democrats voted in favor and two
Republicans – Senators Ted Cruz (R-TX) and Rand Paul (R-KY) --voted against the budget agreement.
Congressional Budget resolutions provide broad parameters for federal spending and taxation, including
overall limits on discretionary spending and guidance to authorizing committees directing them to
report legislation that accomplishes specific spending or tax-related goals. Budget resolutions are
intended only to guide congressional activity and are not bills. They require a simple majority vote for
passage in each chamber and cannot be blocked by filibuster in the Senate. Budget resolutions do not
go before the President for his signature and are not subject to his veto authority. Congressional Budget
resolutions that pass both chambers also provide procedural protection from Senate filibuster for
legislation reported in response to such guidance, which is also known as “reconciliation instructions.”
The deal struck between the House and Senate provides reconciliation instructions to the Senate
Finance and Health, Education, and Labor Committees and to the House Ways and Means, Energy and
Commerce, and Education and the Workforce Committees to report deficit-reducing legislation by July
24. While the budget doesn’t dictate how each Committee is to achieve its $1billion target, the
reconciliation instructions are widely seen as paving the way for an Affordable Care Act repeal bill that
the President would then likely veto.
Please contact NCSHA's Althea Arnold with any questions or comments.
Senators Cantwell and Roberts Introduce Housing Credit Minimum Rate Legislation
MAY 06, 2015
On May 5, Senators Maria Cantwell (D-WA) and Pat Roberts (R-KS) introduced S. 1193, the Improving
the Low-Income Housing Tax Credit Rate Act, which would permanently establish a minimum 9 percent
Housing Credit rate and a minimum 4 percent Credit rate for acquisition. In addition to Senator
Cantwell as lead sponsor, 21 Senators are original cosponsors of the bill.
S. 1193 is the companion legislation to H.R. 1142, introduced on February 26 by Representatives Pat
Tiberi (R-OH) and Richard Neal (D-MA), which currently stands at 55 cosponsors plus Representative
Tiberi as lead sponsor.
Establishing permanent minimum Credit rates is one of NCSHA legislative priorities. We encourage all
HFAs and their Housing Credit partners to ask their members to cosponsor and press for enactment of S.
1193 and H.R. 1142.
HUD Modifies Its FHA Distressed Asset Stabilization Program
MAY 05, 2015
HUD recently announced that it is making adjustments to its Distressed Asset Stabilization Program
(DASP) to help more struggling homeowners avoid foreclosure. Specifically, HUD will impose a 12-
month foreclosure moratorium on all loans sold through DASP and create more opportunities for
nonprofit organizations to participate in the program.
Under DASP, HUD sells Federal Housing Administration (FHA)-insured single-family loans that are
headed for foreclosure to investors who are encouraged to work with borrowers to help them avoid
default. Supporters argue that this initiative benefits all parties involved because: in many cases it is
less expensive for HUD than the alternative of a foreclosure and subsequent sale as a real estate-owned
(REO) property; it guarantees that the borrower has access to all available loss mitigation options; and
the loan servicer has a monetary incentive to get the loan performing again. Mortgages must be at least
six months delinquent to be included in a DASP pool, and the loan servicer must have exhausted all
possible steps through FHA's loss mitigation process.
Currently, any investors who purchase a loan pool through DASP cannot foreclose on any of the loans in
the pool for at least six months. Investors are also encouraged, though not required, to asses a
borrower's eligibility for various loss mitigation programs. Under the new guidelines, investors will be
unable to foreclose on loans they purchase through DASP for at least one year, and investors must also
evaluate whether each borrower would qualify for the Home Affordable Modification Program (HAMP).
HUD also announced that non-profit servicers will have first access to Neighborhood Stabilizing
Outcome (NSO) loan pools to boost non-profit participation. NSO pools are comprised of loans from
geographically concentrated areas. Investors who purchase NSO pools are required to ensure that half
of the nonperforming loans in the pool are resolved in such a way that promoted neighborhood
stabilization. HUD will also create special auctions that are only open to nonprofit bidders and
establishing a first-look period during which owner occupants, government entities, and nonprofits have
the opportunity to buy a real estate owned property before an investor may bid. Many advocates had
been urging HUD to increase nonprofits' role in the program, arguing that such groups are more likely to
work with borrowers to help them avoid default than private investors.
Other DASP changes include stricter reporting requirements and increased penalties for failing to
comply. HUD plans to hold the first DASP sale under the new parameters in June 2015.
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Do millions of Americans face impending housing peril?
Rising rents, lack of credit could displace potential borrowers
Pamela Patenaude
April 29, 2015
For those who thought the "improving" economy and a favorable interest-rate environment would
provide a much-needed boost for homeownership, yesterday’s news from the U.S. Census Bureau was
particularly disappointing.
According to Census, the national homeownership rate now stands at 63.7%, marking the sixth
consecutive quarter in which the rate has declined. The rate has dropped by more than five percentage
points since its high of 69.2% in 2004. That translates into some six million households transitioning
from homeownership to rental housing.
To put matters in perspective, the last time the national homeownership rate was this low was during
the first quarter of 1993 when Bill Clinton was beginning his first term as President, the World Wide
Web was still in its infancy, and Jurassic Park – the top-grossing film that year – had yet to hit movie
theaters.
Digging a little deeper, other numbers are similarly disappointing: The homeownership rate for African-
American households now stands at 41.9%, a 20-year low, while the rate for Hispanics has fallen to
44.1%, well off its high of 50.1% in 2007. The homeownership rates for younger households, a
traditional source of strength for the housing market, have also registered precipitous declines.
What’s behind the plunge?
It is clear we are still experiencing the aftershocks of the Great Recession. While the pace of home
foreclosures has lessened, thousands of families continue to migrate from homeownership to the rental
ranks.
For first-time homebuyers, today’s tougher mortgage underwriting standards in the form of higher
down payment and credit-score requirements have been well documented. Credit overlays are
common, as lenders remain cautious about being held responsible for minor defects in underwriting
despite the continuing efforts of the regulatory agencies to assuage these concerns.
For younger households, student debt likely acts as a major obstacle to homeownership. According to
the Consumer Financial Protection Bureau, this debt is approaching $1.2 trillion, an all-time high.
Add to this mix the fact that median household incomes have hardly budged over the past decade, and
it’s clear that fewer and fewer families have the resources for sustainable homeownership.
An optimist would say we are now returning to the historically normal rate of homeownership and the
current decline will soon level off. After all, between 1965 and 1995, the rate hovered between 63% and
65% with little variation outside these two boundaries. Today’s 63.7% rate falls well within this range.
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While such optimism may be warranted, it is hard to square with the broad demographic trends now
unfolding in America. After staying on the housing sidelines during the Great Recession, millions of
young Millennials are beginning to form households for the first time. Lacking the income and wealth for
homeownership, most are choosing to rent, often in urban multifamily settings.
This new demand is putting upward pressure on rents in many cities and making renting less and less
affordable. For those Millennials aspiring to homeownership, they find themselves caught in a vicious
circle: Rising rents are making it even more difficult to save for a mortgage down payment.
America is also becoming increasingly diverse. According to the Urban Institute, minorities are expected
to account for 77% of new household growth this decade and a staggering 88% from 2020 to 2030. The
expansion of the Hispanic population will be a big part of this story.
In the near term at least, renting will be the only housing option for many of these minority families,
who typically have much lower incomes and wealth than their white counterparts. Highlighting the
dramatic impact of these trends, the Urban Institute estimates that 62% of new housing demand will be
rental during this decade, reversing the experience of past decades where most new housing demand
was felt in the ownership market.
In my view, the latest figures from the U.S. Census Bureau portend an even larger decline in the national
homeownership rate. We are likely to arrive at a “new normal” where the rate falls well below 63%. The
flip side of this lower homeownership rate will be an explosion in new rental demand that will send
rents soaring even higher.
The result: Millions more families will find themselves stuck between a rental market they can no longer
afford and a homeownership market for which they do not qualify.
It’s time to wake up to this crisis and make responding to it a national priority.
House FY 2016 THUD Bill Cuts Critical Housing Programs APRIL 29, 2015
Earlier today, the House Transportation-Housing and Urban Development (THUD) Appropriations Subcommittee held its mark-up of the Fiscal Year (FY) 2016 THUD funding bill. The bill provides $55.3 billion in discretionary spending for transportation and housing programs, but falls $1.5 billion short of what HUD says it needs just to maintain current programs in FY 2016 and is $9.7 billion less than the Administration's budget request. The bill also contains several controversial policy provisions, including one that would ostensibly eliminate the Housing Trust Fund (HTF). In a move the Committee claims would maintain HOME funding at last year's $900 million level, the bill would transfer funds that would otherwise capitalize HTF in calendar year 2016—estimated by the Committee at $133 million—into the HOME account to buttress its otherwise reduced appropriation, which the bill sets at just $767 million. The bill further prohibits the transfer, reprogramming, or credit of any funds to HTF. NCSHA strongly opposes both the reduction in HOME program funding and the elimination of the Housing Trust Fund. Subcommittee Chairman Mario Diaz-Balart (R-FL) opened the markup by highlighting key areas of the bill, including $3 billion for the Community Development Block Grant (CDBG) and $900 million for HOME, both equal to their FY 2015 funding levels. Diaz-Balart did not mention the bill’s actual appropriation of just $767 billion to HOME or its transfer of funding from the HTF to HOME to fill the gap between the proposed appropriated level and the $900 million he claimed the bill provides. He did however note that, in order to provide adequate funding for other HUD programs, the bill makes strategic reductions to capital accounts, proposes no new programs or fees, and reduces overhead. Diaz-Balart added that the bill adheres to the FY 2016 budget caps imposed by the Budget Control Act of 2011, and although not perfect, it "takes steps to make sure our…all of your priorities are taken into consideration" if sequestration goes into effect in FY 2016.
Ranking Member David Price (D-NC) remarked that many of the Appropriations Subcommittees were operating under serious constraints given the FY 2016 budget cap. Referring to the THUD bill, he said "We are not investing nearly what we should in our housing and transportation infrastructure…not enough to even sustain it." Price then stressed the importance of a bipartisan budget deal this year, arguing that House Republicans need to address the main drivers of the deficit -- tax expenditures and entitlement spending—and stop forcing "critical domestic investments to bear the brunt of deficit reduction."
Appropriations Committee Chairman Hal Rogers (R-KY) called this a "tough bill" and commended Diaz-Balart for negotiating it as much as possible. Rogers said the bill "strikes an appropriate balance by prioritizing programs that provide critical services to the American public while taking a targeted, thoughtful approach to reducing non-essential or inefficient programs." He highlighted full-funding for tenant-based rental assistance renewals and the importance of capital programs, including CDBG, SHOP, and HOME. He added that the bill would fully-fund project-based rental assistance program for 12 month contracts at $10.65 billion, but this falls $106 billion short of the $10.8 billion HUD estimated it would need to fully fund the project-based Section 8 program.
Appropriations Committee Ranking Member Nita Lowey (D-NY) took issue with the bill's overall low funding level and the various policy riders, especially those related to transportation. Lowey was the only Committee member to address how HOME was funded in this bill. She expressed deep concern that by taking money from HTF to pay for HOME, the Committee would "perpetuate another gap in the spectrum of affordable housing." She remarked that she would address these issues and the policy riders during the full Committee markup which has not yet scheduled.
The Subcommittee unanimously voted to favorably report the FY 2016 THUD bill to the full Committee on Appropriations.
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Homeownership rate falls to lowest since 1993
Economists question whether tumble will continue or has bottomed out
Trey Garrison
April 28, 2015
The national rate of homeownership in the first quarter of 2015 hit the lowest it’s been since 1993,
which continues an ongoing decline in the rate, the Department of Commerce’s Census Bureau
announced today.
The homeownership rate of 63.7% was 1.1 percentage points lower than the first quarter 2014 rate of
64.8% and a 0.3 percentage point drop from the fourth quarter of 2014.
The homeownership rate is an important lagging indicator of demand, says Jonathan Smoke, chief
economist for realtor.com, noting that nothing quite explains what happened in the housing boom and
bust like the homeownership rate and the associated implications for demand and supply.
“At 63.7% we’re now back to Q1-1993 levels and actually 63.7 was the low point for 1993,” Smoke says.
“That level effectively means we have lost all of the gains from the Clinton-W Bush eras. At this level, we
are essentially slightly lower than the average rate in the 1970s and 1980s as well. You have to go all the
way back to the 1960s to see a lower rate that stuck.
"But the rate itself is a lagging indicator because it reflects the percent of households that are owners.
So I think this number now more underscores what we’ve been through versus where we are going,”
Smoke says. “In terms of where we have been, the rate bears witness to the fact that we have record
levels of renters now, and for this decade, essentially all net new households have been renters.”
Smoke notes that there is also a record numbers of owners now as well. And the pace of household
formation is on an uptick, yet the industry has essentially added nothing to the housing stock for a
decade.
"We’ve gone from having a demand problem and a supply surplus to having solid demand and a dearth
of supply," Smoke says. "So where will new households live? Vacancy rates show little room for rentals
and little excess now for owned housing, especially in the fastest growing and strongest markets."
As noted here, an April 15 research report from analysts at Goldman Sachs, “Demographics support
homeownership, tight credit does not,” says that after peaking at 69.4% in 2004, the homeownership
rate in the U.S. has been declining for a decade.
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Based on their research and analysis, they project the homeownership rate to drop further over the next
two years, bottoming at 63.5% in 2016.
That’s a little different than what Ed Stansfield at Capital Economics sees happening.
“The homeownership rate fell further at the start of the year to a 22-year low of 63.7%,” Stansfield
writes in a client note. “However, with credit conditions now loosening and employment set to continue
growing strongly, we suspect this long downward trend may not last for much longer.
“Finally, the strong 1.5 million annual rate of household formation suggests that the 1.7 million reading
at the end of last year was no fluke. As we have previously argued, a long- overdue upturn in household
formation, as more young adults leave the parental home, could provide a significant boost to
homebuilding over the coming years,” he says.
Smoke’s analysis tracks with this reading. He notes that the 63.7% number wasn’t a surprise as he
forecasted that homeownership would fall this year under 64%. But he doesn’t expect it to go much
lower especially with mortgage rates remaining so low.
“The homeownership rate is likely to bottom this year or next not far from where we are now,” Smoke
says. “By historical patterns, the rate could indeed go up. The simple math behind what it costs to rent
versus buy shows that if you can afford the down payment and qualify for a mortgage, it is cheaper to
buy rather than rent in 80% of the counties in the US now. Low vacancies for rentals, higher rents, and
the economics favoring buying will not encourage net new households to be mostly renters.”
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Millennial Expectations Demand Tech and Customer Service Upgrades
by Teresa Blake
APR 28, 2015
It's time for the mortgage industry to adapt to the high-tech expectations of the millennial generation
and provide an end-user experience that focuses on establishing a personal relationship with each
customer and enabling each customer with a stake in the company's brand.
After a lifetime of technology access, millennials have what some call an elevated expectation for what
their customer experiences can and should be: exceptionally convenient, technology-enabled,
accessible, fast and easy to understand. These expectations should not be passed off as a mere side-
effect of an "entitled" population.
Instead, the millennials' expectations indicate a major shift in values that will carry on for future
generations. Business leaders who accommodate these expectations will not only bring much more
opportunity than hardship in the long run, but also more immediately benefit businesses.
Considered to be the most diverse generation in U.S. history according to Pew Research, the behaviors
and buying patterns of this generation are far different and more difficult to define than past
generations. With a population of more than 75.7 million and buying power of $1.68 billion according to
CEB Global, the millennial generation is larger and more influential than any other generation before its
time. Though many have yet to dip their toes into the home buying waters, the question is no longer
whether they'll purchase a home, but when.
This demographic is spending a lot of time searching for homes online and from their mobile devices.
One of the best ways to relate to this generation is to tap into their love of technology. If a company
wants to know where a brand or product stands with these consumers, check YouTube, Yelp, Facebook,
Twitter and LinkedIn for product review posts, and if no one is talking about the company online, then
chances are good consumers don't know the company exists.
Millennials desire a two-way dialogue that allows for greater interaction, feedback and responsiveness.
By making strategic investments into mobile strategy and online channel expansion, lenders will be
more prepared to tap into the millennial market. A comprehensive mobile strategy may appeal to the
millennial borrower's desire to connect on a more personal level by allowing loan officers and brokers to
meet the borrower at their preferred location and walk them through the loan process, answer
questions and deliver instant information.
The benefits of an on-the-go mobile-enabled workforce are not exclusively the borrower's. This tech-
savvy and personal marketing approach can nurture the borrower further into the loan process faster,
increasing productivity, and reducing the overall cost per loan for the lender. In addition, it will improve
the lender's brand image and serve to attract the tech-savvy talent that is entering the workforce in
droves, and who, according to PWC, will represent 50% of the U.S. workforce by 2020. Indeed, the
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millennial affinity for digital and high-tech tools will be a critical factor when it comes to choosing an
employer.
Lenders who pursue channel expansion should do so with a carefully mapped out strategy and keep in
mind that the millennial borrower does not just want convenience and brand interaction, but also
demands a consistent experience from a brand from all customer touch points. The information, service
and experience provided from a branch should be consistent with the service delivered from a mobile
device and should enable the borrower to remain actively engaged throughout the process. With that in
mind, channel expansion should correlate with well-planned technology integrations and operational
alignment strategy.
To crack open the millennial floodgates, lenders must recognize that the millennial consumer is now in
the driver's seat, and the self-service mortgage capabilities that borrowers have come to expect are here
to stay.