One of the panels during this year’s California MBA Western Secondary focused on the ramp up of non-Agency/equity lending. Why has it increased as a portion of the overall residential origination pie? It is attributed to a changing economy and changing borrowers, along with record equity. Add in the high percentage of borrowers who have first-lien mortgage rates below 5 percent (the “lock in effect”). There’s consumer pressure (high debt), equity extraction, the 40 percent of owners don’t have a mortgage, so owners are levering. From Freddie and Fannie’s perspective, the Agencies don’t have an answer for many of these borrowers or scenarios. Any lenders refusing to adapt to these demographics, do so at your own peril. On the housing side of things, Saturday’s Commentary featured “The Missing Principle in Housing Finance” by Marc Biron and Steven Siegel. The article explores how diversifying individual home-price risk could enhance homeowner financial resilience and support safer no- or low-down-payment mortgage lending. Mortgage lenders, loan investors, and other industry participants interested in the concept can contact Marc. (Today’s podcast can be found here. This week’s ‘casts are sponsored by Optimal Blue. Optimal Blue’s Profitability Center unifies pricing, hedge performance, pipeline activity, profitability, and market intelligence into one personalized dashboard, giving mortgage lenders faster, more complete insights to make better capital markets decisions. Today’s has an interview with Angel Oak's Tom Hutchens on the latest from the non-QM space.)
No Major Reaction to As-Expected CPI
It would have been hard for CPI to be any more boring. All key metrics came in perfectly in line with forecasts. Supercore (core minus housing), was 0.189, which is a monthly equivalent of “close enough to the 2.0% target.” Core CPI itself was 0.215%, …