The end of Stearns Wholesale plus one very hot NY market

Sarah Wheeler: Welcome everyone. I’m Sarah Wheeler editor in chief at HW Media with the latest installment of the HousingWire Daily podcast, where our editors and reporters discuss the most compelling stories and sources they’re covering. Really excited about today’s episode when I’m gonna be talking to three of our reporters. I have Brooklee Han, Flávia Nunes, and Maria Volkova to talk about the big stories in real estate and mortgage that they reported on this week. But before we begin, here’s a brief word from our sponsor. Okay. Let’s dive in. I have Brooklee, Flavia, and Maria here. So glad to have them on really excited to introduce them to our audience and on a podcast format. They are up-and-coming reporters with us doing great work, and I’m gonna let each of them introduce themselves starting with you, Flávia.

Flávia Furlan Nunes: Hi, Sarah. I’m Flávia Furlan Nunes, I’m a mortgage reporter for HousingWire since this September. I’m originally from Sao Paulo, Brazil, where I spent more than 10 years covering business and economics before moving to New York City one year ago. And I have a master’s degree in economics and business reporting for Columbia University.

Sarah Wheeler: Thanks, Flávia. Great to get to know you a little bit more. Maria, you’re next. Tell us about you.

Maria Volkova: Hi, Sarah. My name is Maria Volkova and I’m also a mortgage reporter at HousingWire. And I’ve been reporting since July of 2021. So it’s been half a year. I’m a graduate from the University of Maryland where I started journalism and I’m originally from Russia.

Sarah Wheeler: Great. We’re so happy to have you on board. Brooklee, you’re next.

Brooklee Han: Hi, Sarah. I am a real estate reporter at HousingWire, and I’ve been here also since September. I cover mainly agents, brokers, and also the title insurance industry. I graduated last May from Southern Methodist University with a major in German and minored in journalism. And prior to joining HousingWire, I was an international figure skater representing Australia at the 2014 Winter Olympics.

Sarah Wheeler: I’m pretty sure none of our audience saw that one coming. So really interesting tidbit there that we have a former Olympian in our midst here. All of you guys are doing great work, really excited to have you on. So welcome to the podcast. All right, looking back over this week, we saw mortgage rates rising quite a bit, and we had some good news on delinquency rates. Flávia, you cover delinquencies. What was the news there?

Flávia Furlan Nunes: So Sarah, according to the CoreLogic, mortgage delinquency rates hit pre-pandemic levels in October. So 3.8% of mortgages were delinquent by at least 30 days, including foreclosure. And the share was close to the 3.7% rate registered in the same period of 2019. So two years ago. And for two reasons, first, labor market improvements and second home equity increases. Regarding employment, the report found that 82% of the jobs lost in March and April of 2020 were recovered by October accounting for 18.2 million Americans that were back at work, an impressive number. Frank Martell, president and CEO of CoreLogic said, “There are also benefits of disciplined underwriting practices over the past decade that are helping to reduce or avoid a mortgage delinquencies.” So yeah, big news and good news for the industry.

Sarah Wheeler: Yeah. You know, the headline was that delinquency rates went back to pre-pandemic levels. So that is a marker that we’ve been looking for to see how, and as you pointed out, a lot of that is the fact that we have improved economic security. Big part is the jobs. So the report from CoreLogic found that 82% of the jobs lost in March and April were recovered by October. So, you know, I think that’s key. Anytime people have a job they can make their payments easier. In several of the articles that our lead analyst, Logan Mohtashami writes, he really makes the point that the people who have mortgages right now are very…they’re in good financial shape and they did get their jobs back if they lost ’em at all. So that was great news.

You also reported on the mortgage rates, which we saw a significant increase in the last survey rising to 3.45%. So you know, we write those up every week and we keep a big eye on that because it’s key to our audience’s business. But 3.45% still very historically low and yet we know we hear the conversations that LOs are having, where you know, people that we talk to is definitely some soul searching going on, like, “Okay, how are we gonna do this? And as we swing back to that purchase market.” So we’re always keeping a close eye there. We also had several lender-focused stories this week and, Flávia, you reported on one concerning Guaranteed Rate which closed down the wholesale division of Stearns. They only bought that last year. So what did the company say about why they made that decision?

Flávia Furlan Nunes: Yeah, Sarah, we had access and revealed an email Victor Ciardelli sent to brokers. And he wrote that the company win market share by having a laser focus on leveraging the purchase platform that is used mainly by the best loan officers in the business. So he decided it was a really hard decision and the email explained that the last day for closing a transaction is February 28. Guaranteed Rate acquired Stearns Holding January 2021. So one year ago exactly. And we don’t know how much they paid to the financial giant Blackstone Group, which also acquired a stake in Guaranteed Rate as part of the transaction. And in 2020, Stearns originated $20 billion in loans. It was before the acquisition and it had a wholesale channel that was in the largest industry as recently as 2013. But the company was losing market share to UWM. And after the transaction, last year Guaranteed Rate originated $90 billion for September 2021 in loans, an 81% increase compared to 2020. And it puts the company as number eight among the top mortgage lenders in the country. So the message here, I think is that Guaranteed Rate will be focused on loan officers actually. And some of them are originating more than are almost two billion in a year, which also quite impressive.

Sarah Wheeler: I think a really interesting move right now because just this week PennyMac, right? Or maybe it was last week, but just recently, PennyMac launched a new tech platform in the broker channel, reap PennyMac TPO, this follows, you know, we’ve seen Rocket and other people really focus on their TPO division and really go after the wholesale. So it’s interesting to see Guaranteed reset direction. So interesting times as normal. Thanks for that, Flávia.

Maria, you wrote an article this week on a lender and hiring, but kind of going in the other direction, which is reporting that non-QM lenders we’re actually looking to hire loan officers. So the non-QM lenders you talk to who are hiring right now.

Maria Volkova: Yeah. The non-QM space right now is really beefing up. They’re hiring some of the big companies that are looking for mainly LO and processor talent are Griffin Funding, Acra Lending, Newfi, and Angel Oak. So it’s a handful of companies and in all from kind of looking through like job websites around 130 job openings right now amongst these companies.

Sarah Wheeler: We’ve seen a resurgence of the non-QM space as we recover from the pandemic and you’ve got people and, you know, we have this whole time had self-employed, gig workers, people who maybe don’t fit into the QM box, but are still very valuable to lenders. Lenders want to lend to them. They’re good candidates. They have good FICO Scores. They might have high incomes. They just don’t fit into that box. So really interesting to see, as we reported on some other lenders laying off people, right? We had the big debacle with the better.com. Not that long ago laid off 900 people, but here we see the QM really gearing up. So really interesting to see that.

Brooklee, I wanna bring you into this discussion. You wrote an article for our sister site, RealTrends about the number of black mortgage applicants who were denied at a higher rate than others, a survey and what it found.

Brooklee Han: The study was published by Zillow. And it was an analysis of data from the Home Mortgage Disclosure Act. And the study found that nearly one-fifth of black mortgage applicants were denied. And this was the highest rate among all races and compared to white mortgage applicants, black applicants are denied 84% more often. Credit history was the most commonly cited reason for these denials. And typically in black communities, there are a high number of non-traditional financial services such as payday lenders, and the use of these services can significantly hurt credit health. So the study also found that the rate of black homeownership has improved since the great recession reaching 44%. It’s still below the 2004 peak of 49.7%. In addition, black-owned home values are still worth about 16% less than home values overall. And while black-owned home values are appreciating at a higher rate than homes overall. At this year’s forecast appreciations, it would take over 22 years for them to catch up. Of course, you know, there are different programs and things that need to be put in place for black homeowners to obtain mortgages or black home buyers to obtain mortgages. And you know, one bright spot that has recently come about is the adoption of policies by Fannie Mae allowing rental payments account toward credit history, which is definitely a much-needed step to improve the credit and financial access gap.

Sarah Wheeler: It’s really that gap has been top of mind for this administration. And they are to your point, trying to do looking at it from a lot of different angles. I literally just got off a lunch and learn where we were talking about appraisals and how the industry, how the federal government, how, you know, just as a whole we kind of tackle appraisal bias and also just the historic leftovers of appraisals of black neighborhoods, historically, that were valued very low if you’re using comps to then value them now really you are continuing that same pattern. So it’s a story that we try to tackle from a lot of different angles or an issue we try to tackle from a lot of different angles. And so we’re always looking at, you know, things like this report and others to try to shed light there.

Definitely on a lighter note, Brooklee, you talk about some of the hot housing markets, especially in places that we don’t expect. We all know like, oh, coastal cities, you know San Diego, whatever, but you kind of find the markets where it might surprise people to know how hot they are. And so your most recent one is Rochester, New York. So what are local agents saying about that market?

Brooklee Han: So Rochester, New York is definitely an unexpected hot housing market. But in November of 2021, realtor.com rated it the third hottest housing market in the country. And you know, local agents really are kind of still amazed at how hot the market there is. Since kind of the onset of pandemic when people started really buying homes, looking to relocate because they now had flexibility with work from home or you know, maybe they just wanted to start fresh somewhere else or move out of their cramped city apartment to somewhere with a backyard. The markets really picked up, you know, since kind of May of 2020.

This past spring and summer, it was a market like most of the agents had never seen before you know, they said that it was unprecedented, that it left them breathless, that it was kind of chaotic, but also really fun to work in. And then things kind of cooled down a little bit to the sense that, you know, it was less stressful to help a seller kind of decide which offer to accept because they weren’t getting, you know, 40 or 50 offers anymore. It was more like 20 offers, which is still a huge amount, but much less to kind of sift through and go through. And, you know, since kind of mid-September so things have cooled down a little bit more as would be expected with the start of school and then the holiday season, but it’s still a high level of demand. They’re still seeing multiple offers situation. Home prices in December or the median sale price in December was still, you know, about 3% or 4% higher than it was the year before. So prices are still climbing.

A lot of people are moving to Rochester because, you know, they can have access to some city-like amenities Eastman School of Music is there. So there’s a huge culture and art scene. It’s on Lake Ontario, so you also have access to some beautiful nature and wildlife. The Finger Lakes are a short drive away. So it does offer kind of the culture, the arts, the restaurant scene that you know, a bigger city has with more of a small-town vibe. One of the big things that a lot of people like is there’s not a lot of traffic, so, you know, that that’s something that’s is really appealing. And they’re also seeing a lot of buyers who originally, you know, grew up in the area. One of the agents called these boomerang buyers who grew up in Rochester, maybe, you know, moved away for university, got a job in New York City. And now, you know, maybe they’re ready to start a family, maybe they have work from home flexibility and they’ve decided to move back to where they’re originally from and just, you know, take advantage of the different amenities and things available to them as they maybe start their family, or just start this next phase of life.

Sarah Wheeler: You know, we’ve seen that idea. That’s the first time I’ve heard them called that, but definitely that idea of people who are from an area they left because, you know, that’s not where the jobs were, because they wanted to seek their fortune somewhere else. And now moving back I feel like that is the story of the last 18 months, last two years. Me personally, I’m a mom, I have four kids, none of whom live near me. So maybe even boomerang urge as well and move back to the DFW area. But, I think that’s really interesting. You know, last week you reported on Paradise in California. So yeah, it’s a coastal city, but it was pretty much wiped out by the Camp Fire. What did you find there? And I think the thing that always strikes me about that, that we’re seeing across the country is that even in places that are in these like climate zones, whether it’s wildfires or floods, there’s really no slowdown in home buying.

Brooklee Han: Yeah. That was really something that I found interesting with the Paradise market. Is that, you know, there is still a pretty high demand for houses, even though, you know, the risk of fires and, you know, danger from that type of climate disaster is really evident. You know, it wasn’t that long ago that this happened, there are a lot of other fires that have come close to the area. But they are seeing kind of a similar phenomenon of people who are originally from the area or maybe were even impacted by the fires that have moved to nearby Chico but want to come back. They feel it’s time to come back to Paradise.

And so they’re seeing some buyers like that, and they’re also seeing buyers who, you know, the home prices in Paradise are less expensive than other parts of California. And they’re willing to risk it for you know, for being in California and having a lower cost of property. So that’s kind of one of the main reasons that people are looking there. And for some people, you know, the fire risk outweighs the lower home costs. So they’re not looking there and that’s something a lot of agents kind of have to discuss and balance with their clients.

Another concern is maybe they wanna look there and they’re not really concerned about the fires, but they might not be able to afford the added cost of fire insurance. And there’s a big discrepancy from even plot to plot with how much fire insurance costs and who it’s available from. So that’s a big concern. And then also one of the big tips that I thought was really interesting from one of the agents was that you know, maybe your property is really, you know, do a good job of clearing away brush and other things that could be potential fire hazards, but what are your neighbors doing? Because, you know, if the neighbors aren’t doing anything to upkeep their property and to, you know, hopefully prevent some fire danger, it’s not really gonna help you in the long run.

Sarah Wheeler: It’s a great point. And I know some of the reporting was like, you know, people have an idea. In Paradise, specifically, a lot of people who moved away to Chico or other areas actually have come back, as you said. But, you know, for people who are visiting it for the first time or other areas, when they actually see it for themselves, it can be a little intimidating. It’s like, “Oh, I knew there was fire, but to see this just like black and charred area.” And then again in Paradise and other areas like that, it’s not that home builders there can put homes up any faster than anywhere else in the country. In fact, maybe less so as things are getting settled. So I think you really have some compression there because there’s just not a lot of homes to buy.

Brooklee Han: Exactly.

Sarah Wheeler: Well, we will definitely keep looking out for that series. It’s one of my favorites. And really, I just wanted to say thank you to all of the reporters here. We’ll be talking to you guys going forward. I hope our audience gets a chance to get to know you guys a little bit more. Each of you has your own area of expertise and the beats that you cover. And I would love to have you on again, but thank you for being on today.

Maria Volkova: Thank you.

Brooklee Han: Thank you

Flávia Furlan Nunes: Thank you, Sarah.