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What We’re Watching: Your Monthly Mortgage Industry Update – February 2024

February 27, 2024  //  BY Brian Haber

Here’s what is on our radar for this month. In this issue, dive into the monthly mortgage rate updates; gain insights into how a U.S. Supreme Court ruling affects federal agencies; and learn how much U.S. customers lost to fraud activity (hint: it’s more than $10 billion).

Mortgage Rates: A Bit Volatile During the Past Month

Mortgage interest rates for February were all over the place as Fed watchers tried to predict the timing of the central bank’s next move. The Fed held rates steady through the last month, even as inflation subsided. The unexpectedly strong January jobs report caused Treasury yields to rise in early February. This pushed mortgage interest rates closer to the 7% mark and prompted a 500-point drop in the Dow. At the mid-month point, mortgage applications tumbled by 10.6%, according to the Mortgage Bankers Association. 

2023 Was A Record Year for Consumer Fraud

Last year set new records for consumer fraud activity, according to a new report from the Federal Trade Commission (FTC) that found U.S. consumers lost more than $10 billion to various scams. The findings were based on more than 2.6 million fraud reports in 2023, up from 2.5 million the year before when losses topped $9 billion. Investment schemes were the number one category for fraud, resulting in $4.6 billion in losses, followed by imposter scams, which resulted in $2.7 billion in losses. "Digital tools are making it easier than ever to target hard-working Americans, and we see the effects of that in the data we're releasing today,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. Keep in mind that our FraudGuard solution is designed to protect lenders and banks from these same digital tools and other variations of identity fraud.

Supreme Court Finds Federal Credit Reporting Rules Apply to Federal Agencies

Earlier this month, the U.S. Supreme Court ruled that federal agencies do not have sovereign immunity under the Fair Credit Reporting Act (FCRA) and can be sued by consumers for damages. The unanimous ruling came in the case of the Department of Agriculture Rural Development Rural Housing Service v. Kirtz, No. 22-846, and involved a consumer’s dispute with the consumer reporting agency and a division of the U.S. Department of Agriculture (USDA) over a mortgage secured by a division of USDA. The consumer claimed that he repaid a loan from the USDA, but despite the repayment, the USDA reported the loan as overdue, and this damaged the plaintiff’s credit score and ability to acquire loans at affordable rates. After reporting this issue to the CRA, which notified the USDA, the agency failed to take “any action to investigate or correct” the problem, the suit alleged. The ruling against agency immunity to FCRA is expected to have broad implications for other federal agencies that furnish information to CRAs and that fail to investigate disputes.

Fannie Sees Lower Rates and a Return to Normalcy

A recent report from Fannie Mae predicts that mortgage rates will begin a slow descent from their current levels to an average of 5.8% by the end of 2024. In the report, Fannie Mae’s Chief Economist Doug Duncan said he expects home sales to recover this year as the housing market returns to a more typical pattern due to a decrease in mortgage rates. Lower rates lead to lower monthly payments and improved affordability, attracting more potential buyers who can finally buy a home. Fannie Mae is forecasting roughly 4.5 million home sales by the end of 2024. Also, the recent drop in rates has spurred an uptick in mortgage refinancing, which dropped to a 20-year low in 2023. If rates do decrease in 2024, recent home buyers may swap out their high-interest-rate loans for better terms.  

FHA and VA Follow FHFA on Bi-Merge

FHA and the VA are considering following the FHFA in shifting from a tri-merge credit score to a bi-merge credit scoring process. In March 2023, the FHFA announced the proposed implementation timelines for the use of the FICO 10T and VantageScore 4.0 credit score models by Fannie Mae and Freddie Mac. Both agencies are planning to transition to two, rather than three credit reports within the year.  

Freddie Mac Standardizes DPA Docs, Offers Low-Income Purchase Credit

Freddie Mac rolled out standardized subordinate lien documents for sub-mortgages offered by down payment assistance (DPA) providers to facilitate easier and greater use of DPA programs. Previously, these documents for various DPA programs have been housing finance agency-specific and worded differently leaving room for confusion when interpreting terms and payment plans.  This standardization will help increase the number of lenders interested in participating in DPA programs. The single standardized format enables state agencies to manage, edit, and update their programs in real-time.

This month, Freddie Mac also announced a $2,500 credit for down payment, closing costs, escrow, and mortgage insurance premiums for low-income buyers. To qualify, potential homebuyers would need to earn 50% or less of the median income for the area in which they plan to purchase a home. This credit will be extended to families who qualify for Freddie Mac’s Home Possible and HFA Advantage products.

“This new effort continues the progress made in 2023 and is particularly important in today’s housing market where elevated rates and low supply have created affordability challenges for many families,” said Sonu Mittal head of Freddie Mac’s single-family acquisitions division. “We look forward to announcing additional ways to support low-income borrowers in the months ahead.” Freddie Mac financed about 800k home purchases in 2023 with first-time homebuyers representing about 51% of those purchases, which is the highest number since the company started tracking this statistic three decades ago. 


About This Blog:

What We’re Watching is a monthly blog of industry news curated by Brian Haber, who monitors the mortgage market for First American Data & Analytics.

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