The number of non-performing loans fell in the first of half of 2018, compared with the same period a year earlier, according to semiannual report from the Federal Housing Finance Agency. In the first half of 2018, 7,140 non-performing loans were sold, compared to 18,419 in 2017. Non-performing loans sold through the first half of 2018 had an average delinquency of 3.1 years and an average current loan-to-value ratio of 95 percent.

Just three states, however, New Jersey, New York, and Florida accounted for 46 percent of non-performing loans that were sold.  They accounted for 47 percent of the Enterprises' loans that were one year or more delinquent as of Dec. 31, 2014, which was prior to the start of non-performing loans sales in 2015. From Dec. 31, 2015 to June 30, 2018 the number of loans one or more years delinquent held in the Enterprises' portfolio decreased by 61 percent.

The following provides more on the borrower outcomes in the report:

• As of June 30, 2018, 62 percent of these non-performing loans had been resolved.
• Compared to a benchmark of similarly-delinquent Enterprise non-performing loans that were not sold, foreclosures avoided because non-performing loans were sold were higher than the benchmark.
• Non-performing loans on homes occupied by borrowers had the highest rate of foreclosure avoidance outcomes, 28.2 percent foreclosure avoided compared with 12.7 percent for vacant properties.
• Non-performing loans on vacant homes had a much higher rate of foreclosure, more than double the foreclosure rate of borrower-occupied properties, 65.9 percent foreclosure versus 28.6 percent for borrower occupied properties.  Foreclosures on vacant homes typically improve neighborhood stability and reduce blight as the homes are sold or rented to new occupants.
• Twenty percent of the permanent modifications of non-performing loans incorporated arrearage or principal forgiveness.  The average forgiveness earned per loan to date was $55,280, with the potential to earn an average forgiveness of $77,491.

Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $480 on each loan they originated in the third quarter of 2018, down from a reported gain of $580 per loan in the second quarter, according to the Quarterly Mortgage Bankers Performance Report from the Mortgage Bankers Association.

“These are very challenging times for independent mortgage bankers, with the average pre-tax net production income per loan reaching its lowest level for any third quarter since inception of our report in 2008,” said Marina Walsh, vice president of industry analysis for the MBA. “Profitability continues to be hindered by high costs and low productivity. We expect fixed costs to remain elevated, and competitive pressures will continue to hamper production revenues in the winter months. Therefore, mortgage banker profitability will likely remain challenged.”

Key findings of the report include the following:

• Average production volume was $474 million per company in the third quarter of 2018, down from $531 million per company in the second quarter of 2018. The volume by count per company averaged 1,948 loans in the third quarter, a decrease from 2,180 loans in the second quarter. For the mortgage industry as a whole, however, MBA estimates production volume in the third quarter was slightly higher compared to the previous quarter.
• The average pre-tax production profit was 20 basis points in the third quarter, down slightly from an average net production profit of 21 bps in the second quarter, and down 21 bps from the third quarter of 2017.
• The purchase share of total originations, by dollar volume, increased to 82 percent in the third quarter, its highest level since inception of the study in the third quarter of 2008. For the mortgage industry as a whole, MBA estimates the purchase share at 76 percent in the third quarter.
• The average loan balance for first mortgages reached a study high of $255,539 in the third quarter, up from $255,136 in the second quarter.
• The average pull-through rate (loan closings to applications) was 75 percent in the third quarter, up from 72 percent in the second quarter.
• Total production revenue (fee income, net secondary marking income and warehouse spread) increased to 358 basis points in the third quarter, up from 347 bps in the second quarter.
• On a per-loan basis, production revenues increased to $8,654 per loan in the third quarter, up from $8,458 per loan in the second quarter.
• Net secondary marketing income increased to 280 basis points in the third quarter, up from 271 bps in the second quarter.
• On a per-loan basis, net secondary marketing income increased to $6,802 per loan in the third quarter from $6,650 per loan in the second quarter of 2018.
• Total loan production expenses, such as commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations, increased to $8,174 per loan in the third quarter, up from $7,877 per loan in the second quarter. For the period from the third quarter of 2008 to the present quarter, loan production expenses have averaged $6,312 per loan.
• Personnel expenses averaged $5,405 per loan in the third quarter, up from $5,195 per loan in the second quarter.
• Productivity decreased slightly to 1.9 loans originated per production employee per month in the third quarter, down from 2.1 in the second quarter. Production employees includes sales, fulfillment and production support functions.
• Including all business lines (both production and servicing), 71 percent of the firms in the study posted pre-tax net financial profits in the third quarter, down from 77 percent in the second quarter.

"Mortgage servicing remains a bright spot for bankers, with relatively low delinquencies and high loan balances driving up per-loan servicing revenues,” said Walsh. “Including all business lines (both production and servicing), 71 percent of the firms in the study posted a pre-tax net financial profit in the third quarter. Without servicing, that percentage would have dropped to 52 percent.”

As the year is coming to an end, homeowners are more optimistic than ever that their home is worth more than they owe on it, and they expect that value to keep rising through 2019. A new Rasmussen Reports national telephone and online survey finds that 69% of American Homeowners now say the value of their home is worth more than the amount they owe on their mortgage, up from the 66%, a nine-year high, established in May of 2018. And at that time, just 24% said their home was not worth more than what they still owed on it, though 10% were not sure.

Wells Supports Fire Victims

Wells Fargo & Company’s Mobile Response Unit has arrived in Chico, Calif., to provide housing recovery assistance as well as help for auto, credit card, personal lines-loan, student loan and small business loan customers in areas impacted by recent wildfires.

“Our thoughts are with those customers and communities that have been impacted by the devastating wildfires,” said Joanna Padilla-Mitchell, River Valley district manager. “The arrival of our Mobile Response Unit in Chico brings a variety of on-site assistance to help our customers as they begin the recovery process.”

The Mobile Response Unit is a 75-foot, heavy-duty commercial “office on wheels” designed to bring valuable information directly to Wells Fargo customers after a disaster. It has private offices and is equipped with computers and cellular data feed with satellite backup. The Mobile Response Unit is powered by self-contained generators.

Wells Fargo has pledged $1.75 million in donations to support wildfire relief efforts, with $225,000 going to the American Red Cross and the remaining amount to be disbursed to nonprofits located in affected communities.

Predicting Borrower Behavior

Equifax is offering Mortgage Lead Generation Models—a data-base offering designed to help predict the likelihood that a lead will apply for a mortgage within the next two to six months.

The solution uses credit, asset, property and demographic data, and includes four different models, which are segmented based on the consumer profile:

• New purchase
• First-time home buyer
• Refinance
• Home equity

"It's critical for mortgage lenders to get off the sidelines and become more proactive in identifying prospects and building meaningful relationships with them," said Tyler Sawyer, vice president of rental and real estate at Equifax. "This solution makes the data actionable to help lenders find the right customer at the right time, which is important in a highly competitive market where 55 percent of buyers are starting their process online."

The Mortgage Lead Generation Models allow lenders to determine their own scenarios and desired number of leads for retention or acquisition. Equifax's models create a score that appends to a name and address provided by the lender or even identify new leads for those likely to transact in specific geographic areas.

The score is based on the lender's requirements and ranges from 1 to 999; the higher the score, the more likely the consumer is to apply for a mortgage loan. Armed with this information, lenders can better execute their marketing campaigns.

In an internal test of the solution, Equifax found impactful lift across segments: The top 10 percent of the scores captured between 2.4 to 4 times more mortgage applicants than a randomly selected sample of equal size.

First Financial of Maryland Federal Credit Union is implementing CU Direct's Lending 360 account and loan origination system. It provides credit unions with a single platform that automates loan application processing activity across all consumer lending channels.

"Through our [request for proposal] process, we reviewed four major industry providers, with our primary objectives being to provide members with a more simplified, convenient, and streamlined lending experience,” said Dan Kriebel, chief lending officer of First Financial. “Other key factors considered in the RFP selection were workflow efficiency, compliance, cost, reporting capabilities, ease of installation/execution and cultural compatibility.”

The LOS is designed to give credit unions the ability to drive more loans and account openings faster and generate efficiency, while improving the member experience throughout the loan application and approval process.

"A great lending experience starts with ease of use. Lending 360 greatly simplifies the process for credit unions and their members," said Brit Barker, vice president of sales at CU Direct.  “We're excited to be working with First Financial of Maryland, helping them gain a competitive edge and grow their loan portfolios by leveraging our platform's capabilities."

First Financial has 63,724 members and $1.1 billion in assets. More than 135 credit unions have licensed the Lending 360 platform from CU Direct.