2016 Wisconsin Real Estate and Economic Outlook Conference. October 13, 2016

Transcription

1 2016 Wisconsin Real Estate and Economic Outlook Conference October 13, 2016

2 Legal Disclaimer The information presented in this presentation is for general information only, and is based on guidelines and practices generally accepted within the mortgage finance industry and is not intended to be all-inclusive. MGIC makes no representations or warranties of any kind with respect to the accuracy, completeness or suitability for any purpose of the information contained in this presentation. MGIC expressly disclaims any and all warranties, express or implied, including without limitation warranties of merchantability and fitness for a particular purpose regarding these materials and this presentation. In no event will MGIC be liable for any direct, indirect, incidental, punitive or consequential damages of any kind with respect to the presentation or materials provided. All examples are hypothetical and are for illustrative purposes only. This presentation is not intended and should not be interpreted or relied upon as legal advice. We encourage you to seek advice from a qualified professional. MGIC October

3 Risk Factors High-LTV Rebirth % LTV > 90% rising Max 97% LTV Max 105% CLTV Improved Credit Profile WA FICO up % FICO <620 down Risk-based pricing Source: Fannie Mae 2016:Q2 Credit Summary 3

4 Risk Layering & Market Impact Inc cidence Rate Loans combining multiple high-risk factors perform worse (layered risk) Good Market: 4-yr home price appreciation of 10% or better Bad Market: 4-yr home price appreciation of -10% or worse Source: MGIC Risk Management 4

5 GSE Mix: Pre-Crisis >60% LTV was 82 % of market >80% LTV was 27% of market Strong shift towards higher LTV, lower FICO Source: Core Logic Loan Level Market Analytics 5

6 GSE Mix: Current Business >60% LTV is 80 % of market >80% LTV is 28% of market Shift back towards lower LTV and much higher FICO Source: Core Logic Loan Level Market Analytics 6

7 Non-GSE Mix: Pre-Crisis >60% LTV was 86% of market >80% LTV was 32% of market Strong shift towards higher LTV and lower FICOs at <90% LTV Dominated by PL RMBS Heavy concentration of subprime and reduced/no documentation Source: Core Logic Loan Level Market Analytics 7

8 Non-GSE Mix: Current Business >60% LTV is 78% of market >80% LTV is 11% of market Shift back towards lower LTV and much higher FICO Dominated by regulated depository institutions (portfolio lending) Largely prime and full documentation Source: Core Logic Loan Level Market Analytics 8

9 Niche Products Emerging CRA/Affordable Doctors Loans Super Jumbo (>$1,000,000) Non-Warrantable Condo Foreign National Bank Statement Asset Inclusion/Depletion Nonprime MGIC October

10 Thank you! Contact: Geoffrey F. Cooper VP Product Development

11 Wisconsin Real Estate and Economic Outlook Conference October 13, 2016 Nicholas J DelTorto President-CEO Inlanta Mortgage Inc.

12 In 15 minutes... Current Outlook Rapidly evolving regulatory environment Current credit profile-are safeguards in place to prevent a repeat to the housing crisis?

13 Focus on few key items: Continued positive, but muddling at best, economic growth through Inflation remains low, Mortgage rates rising but too much more years under 5.5% Total Origination Volumes: Upward revision for 2016 now on par with 15, with about 15% decline in 17, and flat in 18 MBA Economics Research

14 Values have recovered to pre crisis levels Lack of inventory is constraining market for FTHB Regions vary, but trend should impact homeowner confidence, willingness/ability to move up. Could improve inventory situation. Index FHFA US Purchase-Only House Price Index (SA) March % 140 Jan-2001 May- Sep- Jan-2002 May- Sep- Jan-2003 May- Sep- Jan-2004 May- Sep- Jan-2005 May- Sep- Jan-2006 May- Sep- Jan-2007 May- Sep- Jan-2008 May- Sep- Jan-2009 May- Sep- Jan-2010 May- Sep- Jan-2011 May- Sep- Jan-2012 May- Sep- Jan-2013 May- Sep- Jan-2014 May- Sep- Jan-2015 May- Sep- Jan-2016

15 Lifetime Intentions to Own Home Among Younger Renters (18-39 years old) Source: Fannie Mae National Housing Survey

16 So.with these good solid fundamentals, what could go wrong?

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18 Pictures worth a thousand words...

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21 Regulation through enforcement instead of guidance- lack of specific guidance. Fear is not an effective motivator- lenders retract Zero tolerance for defects does not workharms the consumer. Small immaterial defects can t be corrected and create unsaleable loans.

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23 Credit profiles? A repeat to the Crisis? The pendulum has swung fully to the other side. Strongest credit profile, 700+ FICO and performance in decades Underwriting has changed from common sense, ability to repay, to multiple verification of the same information and strict adherence to guidelines. Trust between counterparties is gone

24 This data may seem self serving, but we need large bank aggregators in the market

25 Credit expansion a matter of perspective

26 So what needs to happen? GSE reform which includes greater liquidity, access and uniform pricing for all participating lenders big or small. Return to normal credit and collateral underwriting without the burden for layered documentation burden on consumer. A STOP to regulation by enforcement- provide clear, specific guidance to lenders instead of a gotcha approach with heavy fines and penalties for immaterial errors and unsaleable loans

27 Thank you!

28 Transformations in Housing Finance: What s on the Horizon? Michael Kellman Senior Vice President - Lending North Shore Bank

29 Time to Close Increasing Ellie Mae NSB

30 90% Huge Increase in Shorter Term Loans Percentage of Loans Less Than 15 Years to Those 15 Years and Over 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: North Shore Bank

31 Changing Buyers

32 Changing Buyers

33 Changing Buyers $255, $245, $235,000 $225,000 $215, $205,000 $195,000 $185,000 $175, $165, $155, Source: Freddie Mac Avg Loan Amount Average LTV

34 Changing Buyers

35 Trends in Consumer Mortgage Application to Close will stay near 40 days Shorter term loans Lower mortgage debt as percentage of income but higher other debt These changes = lower delinquency Internet applications only if prompted likely to change as more Millennials enter market

36 CRE Loan Volume Exploding

37 Trends in CRE Variable rate loans High volume expectations mostly refi Owners retaining their properties longer Steady Cap rates likely New Construction

38 THANK YOU Michael Kellman North Shore Bank