Change is in the Air: Fall 2020 Market Update

There are a lot of important things happening in the mortgage and appraisal world right now. We want to give you a rundown of some of the things we’ve been talking about around the office, and with our clients, for the past few weeks.

Upcoming Refinance Fee

Historically low interest rates have caused a refinance boom during this pandemic, and no one has felt it more than lenders and appraisers! We’ve all been working hard to meet the increased demand for refinances.

Beginning on December 1st, Fannie Mae and Freddie Mac will charge a .5% adverse market fee to those who are refinancing a mortgage. Many lenders are incorporating these charges into rate locks starting now. 

This fee is in response to the federal CARES Act. The act was designed to protect homeowners and renters from being foreclosed on or evicted during COVID-19. The charge is designed protect Fannie and Freddie from these adverse conditions.

Ultimately, the fee could cause a slowdown in the refinance market due to increased rates, but we’ll have to wait and see what happens. If you’re dialing your book of business to try and get them locked in, make sure to take advantage of our FREE Comp Tool. It can determine a home’s appraised value and help you structure your deal! 

Fannie and Freddie Exiting Conservatorship? 

There’s a lot of buzz about Fannie and Freddie exiting their government conservatorships. The FHFA is working on a proposal to bring them out of these conservatorships and back to the public market while also reducing risk and building capital.

There are a lot of different opinions about what that means, but one thing’s for sure—whatever happens with these GSEs will impact the housing market for years to come. Bringing Fannie and Freddie back would create a more competitive market for housing financing. And for the housing industry to really grow, the private sector needs to be tapped.

However, investors would demand a higher return for their increased risk, so mortgage rates would likely go up and loan origination volume would likely go down. Bringing Fannie and Freddie out of conservatorship could also lead to higher credit-score stipulations for qualifying. This would push more homebuyers toward FHA loans or private mortgages, leading to fewer Fannie and Freddie loans in the future. 

It’ll be interesting to see how this plays out and how the housing market adjusts to what happens. 

How Adding Private Equity Back to the Market Could Change the Appraisal Process

We’ve mentioned before that the appraisal industry is moving toward virtual options that could speed up the entire process of getting a loan. That’s been especially true during this pandemic—the FHFA eased standards for appraisals in March to keep everyone safe. But the industry is still pushing for faster turn times. Lenders are working hard to get those turn times down, but the appraisal is often a holdup. Rushes aren’t possible with appraisers already at capacity and doing everything they can to meet demand.

At Kairos Appraisal, we’re on the forefront of this next step for the appraisal world. The industry as a whole must better utilize technology to speed up turn times on appraisals while also staying accurate.

We’re hard at work developing an app that we believe will allow for accurate virtual appraisals. It’s likely the first adapters of this type of technology and newly designed appraisal process will be private capital. We are hopeful that through testing, we can show that this technology can replace a full-blown, traditional appraisal. We hope to work towards getting it approved with Fannie and Freddie. 

Successfully using technology to reduce appraisal turn times while staying accurate is going to be a game-changer for the entire housing market, and we’re excited to keep the ball rolling on this effort.

loanDepot Going Public?

loanDepot is a nonbank lender that’s considering an IPO at the end of 2020. Its digital capabilities are a huge selling point—it verifies income, assets, and employment quickly and easily. It also offers algorithm-based loan options and extremely fast title clearance. These innovations in mortgage origination have revolutionized the lending experience. It’s gone from a paper process to a digital process, saving people tons of time and hassle. We’re working hard to help the appraisal industry catch up to these technological advances.

Nonbank lenders like loanDepot have dominated the market for single-family purchase loans in recent years. In fact, nonbank lenders originated 56.4% of all home purchase loans in 2019. 

As a side note, we are so grateful and proud that we recently became an approved AMC with loanDepot Wholesale! It is a privilege to serve the loanDepot community in such exciting times.

If you have any thoughts on the housing market, the future of home appraisals, or anything else, reach out at [email protected] or (425) 967-3794. 

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