CoreLogic^® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released the Home Equity Report for the first quarter of 2019. The report shows that U.S. homeowners with mortgages (which account for roughly 63% of all properties) have seen their equity increase by 5.6% year over year, representing a gain of nearly $485.7 billion since the first quarter of 2018.

The average homeowner gained $6,400 in home equity between the first quarter of 2018 and the first quarter of 2019. Some states saw much larger gains. In Nevada, homeowners gained an average of approximately $21,000. In Idaho, homeowners gained an average of approximately $20,700 and Wyoming homeowners gained an average of $20,300 (Figure 1).

From the fourth quarter of 2018 to the first quarter of 2019, the total number of mortgaged homes in negative equity decreased 1% to 2.2 million homes or 4.1% of all mortgaged properties. The number of mortgaged properties in negative equity during the first quarter 2019 fell 11%, or by 268,000 homes, from 2.5 million homes, or 4.7% of all mortgaged properties, from the first quarter 2018.

“A moderation in home-price growth has reduced the gains in home-equity wealth and will likely slow the growth in home-improvement spending in the coming year,” said Dr. Frank Nothaft, chief economist for CoreLogic. “For larger remodeling projects, homeowners often choose to cash-out some of their home equity through a first-lien refinance or placement of a second lien.”

Negative equity, often referred to as being underwater or upside down, applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both. Negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis, which began in the third quarter of 2009.

The national aggregate value of negative equity was approximately $304.4 billion at the end of the first quarter of 2019. This is up approximately $2.5 billion from $301.9 billion in the fourth quarter of 2018 and up year over year by approximately $18 billion from $286.4 billion in the first quarter of 2018.

“The country continues to experience record economic expansion as illustrated by these increases in home equity,” said Frank Martell, president and CEO of CoreLogic. “We expect home equity to continue increasing nationally in 2019, albeit at a slower pace than in recent years.”

Methodology
The amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the MDO, then the property is determined to be in a positive equity position. The data is first generated at the property level and aggregated to higher levels of geography. CoreLogic data includes more than 50 million properties with a mortgage, which accounts for more than 95% of all mortgages in the U.S. CoreLogic uses public record data as the source of the MDO, which includes both first-mortgage liens and second liens, and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. The calculations are not based on sampling, but rather on the full data set to avoid potential adverse selection due to sampling. The current value of the property is estimated using a suite of proprietary CoreLogic valuation techniques, including valuation models and the CoreLogic Home Price Index (HPI). In August 2016, the CoreLogic HPI was enhanced to include nearly one million additional repeat sales records from proprietary data sources that provide greater coverage in home price changes nationwide. The increased coverage is particularly useful in 14 non-disclosure states. Additionally, a new modeling methodology has been added to the HPI to weight outlier pairs, ensuring increased consistency and reducing month-over-month revisions. The use of the enhanced CoreLogic HPI was implemented with the Q2 2016 Equity report. Only data for mortgaged residential properties that have a current estimated value are included. There are several states or jurisdictions where the public record, current value or mortgage data coverage is thin and have been excluded from the analysis. These instances account for fewer than 5% of the total U.S. population. The percentage of homeowners with a mortgage is from the 2016 American Community Survey. Fourth quarter of 2017 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.

Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net gain of $285 on each loan they originated in the first quarter of 2019, up from a reported loss of $200 per loan in the fourth quarter of 2018, according to the Mortgage Bankers Association’s (MBA) newly released Quarterly Mortgage Bankers Performance Report.

“Independent mortgage bankers experienced improvements in the first three months of the year. This was a welcoming sign following a very difficult end of 2018, in which profitability reached its lowest level since our survey’s inception in 2008,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “Mortgage application volume picked up strongly towards the end of the first quarter as rates dropped, increasing the pipeline of loans for the second quarter. Given the drop in rates, lenders also enjoyed a boost in secondary marketing gains.”

Added Walsh, “While we still saw a decline in overall production volume in the first quarter, revenues per loan rose to a study high, mitigating the increase in per-loan production expenses, also at a study high.”

Key findings of MBA’s first quarter of 2019 Quarterly Mortgage Bankers Performance Report include:

• The average pre-tax production profit was seven basis points (bps) in the first quarter, up from an average net production loss of 11 bps in the fourth quarter.
• Total production revenue (fee income, net secondary marking income and warehouse spread) increased to 393 bps in the first quarter, up from 351 bps in the fourth quarter. On a per-loan basis, production revenues increased to a study high $9,584 per loan in the first quarter, up from $8,411 per loan in the fourth quarter.
• Net secondary marketing income increased to 308 bps in the first quarter, up from 269 bps in the fourth quarter. On a per-loan basis, net secondary marketing income increased to $7,591 per loan in the first quarter from $6,466 per loan in the fourth quarter.
• Average production volume was $385 million per company in the first quarter, down from $440 million per company in the fourth quarter of 2018. The volume by count per company averaged 1,571 loans in the first quarter, down from 1,799 loans last quarter. For the mortgage industry as a whole, MBA estimates for production volume in the first quarter was lower than last year’s fourth quarter.
• The purchase share of total originations, by dollar volume, decreased to 76 percent in the first quarter from 79 percent in the fourth quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 70 percent last quarter.
• The average loan balance for first mortgages reached a study high of $257,374 in the first quarter, up from $253,689 in the fourth quarter.
• The average pull-through rate (loan closings to applications) was 69 percent in the first quarter, down from 75 percent in the fourth quarter.
• Total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – increased to a study high of $9,299 per loan in the first quarter, up from $8,611 per loan in the fourth quarter. For the period of the third quarter of 2008 to last quarter, loan production expenses have averaged $6,435 per loan.
• Personnel expenses averaged $5,931 per loan in the first quarter, up from $5,636 per loan in the fourth quarter.
• Productivity remained unchanged at 1.8 loans originated per production employee per month in the first quarter. Production employees includes sales, fulfillment and production support functions.
• Including all business lines (both production and servicing), 59 percent of the firms in the study posted pre-tax net financial profits in the first quarter, up from 44 percent in the fourth quarter.

MBA's Mortgage Bankers Performance Report series offers a variety of performance measures on the mortgage banking industry and is intended as a financial and operational benchmark for independent mortgage companies, bank subsidiaries and other non-depository institutions. Eighty percent of the 326 companies that reported production data for the first quarter of 2019 were independent mortgage companies, and the remaining 20 percent were subsidiaries and other non-depository institutions.

The Consumer Financial Protection Bureau (Bureau) today announced a settlement with Freedom Mortgage Corporation (Freedom), one of the ten largest Home Mortgage Disclosure Act (HMDA) reporters nationwide.

Freedom is a mortgage lender with its principal place of business in Mount Laurel, N.J. For each year from 2013 through 2016, it originated more than 50,000 home-purchase loans, including refinancings of home-purchase loans. Freedom is required to collect, record, and report data on HMDA-covered transactions to comply with HMDA and Regulation C.

According to the consent order, the Bureau found that Freedom violated HMDA and Regulation C by submitting mortgage-loan data for 2014 to 2017 that contained errors. The Bureau found that Freedom reported inaccurate race, ethnicity, and sex information and that much of Freedom’s loan officers’ recording of this incorrect information was intentional. For example, certain loan officers were told by managers or other loan officers that, when applicants did not provide their race or ethnicity, they should select non-Hispanic white regardless of whether that was accurate.

Under the terms of the consent order, Freedom must pay a civil money penalty of $1.75 million and take steps to improve its compliance management to prevent future violations.