When I see a headline with “housing” and “crash” in it, I think it is merely clickbait, and the author is trying to attract readers. For example: The Office of the Comptroller of the Currency (OCC) reported on the performance of first-lien mortgages in the federal banking system during the third quarter of 2024. The OCC Mortgage Metrics Report, Third Quarter 2024, showed that 97.4 percent of mortgages included in the report were current and performing at the end of the quarter, a slight increase from 97.3 percent one year earlier. Borrowers have the ability to repay, there’s equity, and the majority of existing rates are low. If want to fret, target renters who want to own. It seems like the best time to buy a home has always been in the past, and now affordability is not good. ATTOM released its fourth-quarter 2024 U.S. Home Affordability Report showing that median-priced single-family homes and condos remain less affordable in the fourth quarter of 2024 compared to historical averages in nearly every county. The latest trend continues a three-year pattern of home ownership requiring historically large portions of wages as U.S. home prices keep reaching new heights: View Q4 2024 U.S. Home Affordability Heat Map. (Today’s podcast can be found here and this week’s podcasts are sponsored by Visio Lending. Visio, which has a top-notch broker program, is the nation's premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Hear an interview with Visio Lending’s Jeff Ball on the DSCR underwriting space and how the mortgage industry can qualify more eligible borrowers.)

Lender and Broker Software, Services, and Products

“Unlock the key to trust and compliance in the mortgage industry with SOC reports! As a mortgage service provider, you know that customers expect transparency and security. Don’t wait for them to ask—get SOC compliant today! Richey May’s latest guide breaks down everything you need to know about SOC 1 and SOC 2 reports, helping you choose the right one for your organization. Whether you're processing financial transactions or providing outsourced services, demonstrating your commitment to data security is essential. Stand out in a competitive market by proactively addressing risks and building customer confidence. Ready to elevate your security posture? Dive into our guide now and contact Richey May at info@richeymay.com for expert guidance tailored to your needs.”

What if your POS made collecting conditions from borrowers effortless? Imagine if borrowers could see conditions in plain English and can easily upload documents or complete tasks. What if your processors could avoid the endless cycle of logging in and out of files or sending countless emails, because documents flowed seamlessly into the eFolder? With LiteSpeed, you can unlock a new level of productivity and efficiency because it was built specifically for Encompass® by ICE Mortgage Technology™. Sign up for a demo here.

Servicers know not every interaction with customers is created equal. It’s the meaningful conversations that can help drive true retention efforts. ICE is delivering self-service tools to help customers answer more loan questions on their own, and digital innovations for agents that helps them provide a better call center experience when customers do reach out. Read the blog from ICE’s EVP of Servicing Technology Product Innovation Sandra Madigan on how ICE is elevating the call center experience for customers and agents.

Wholesale and Correspondent Products

“Planet is a leader in sub-servicing for RTL and DSCR loans. We combine years of experience with a specialized commercial platform to deliver what others can’t: granular portfolio insights, tailored monitoring and reporting, smooth draw administration, and proactive borrower communication. While other systems fall short of addressing RTL and DSCR nuances, Planet proves exceptional sub-servicing does exist. Book your meeting with us at IMN’s Residential Lenders Forum to discover how Planet is maximizing results for investors like you.”

“AFR Wholesale: Riding into 2025! As we gear up for the new year, AFR is committed to delivering even greater value to help you thrive. With exciting advancements in technology, newly updated programs, and enhanced services, we’re here to elevate your business in 2025 and beyond! What’s coming? Ask Howie: Our new AI-powered tool designed to provide quick, tailored answers to your questions, Refined Communication Portal: Streamlined for better efficiency, Program Enhancements: Updates to our lending programs to better meet the needs of today’s market and your borrowers. Enhanced Teams & Processes: Focused on delivering exceptional client experiences. Stay connected and be the first to experience these innovations and more. Together, we’ll navigate the road ahead, ensuring your success every step of the way. Let’s make 2025 your best year yet! Reach out at sales@afrwholesale.com, call 1-800-375-6071, or visit www.afrwholesale.com. We can’t wait to hear from you! (NMLS 2826)”

“The Symmetry Lending team sends our sincere gratitude to all our partners! We are nothing without you. We acknowledge that 2024 was a difficult year for many in the mortgage business, but we believe that 2025 is the year it will pay off. Service, Speed, & Simplicity is our commitment to current and future partners. Symmetry made many HELOC enhancements in 24; check out our HELOC offerings by going to our website: Knowledge Center | Symmetry Lending. We offer Standalone 1st lien purchase and refi HELOCs on Primary, Second Home and NOO; Standalone 2nd lien HELOCs on Primary and Second Home; & Piggybacks with lightning speed. Cheers & Happy Holidays!”

Lender and Investor FHA and Reverse News

Government programs consistently account for 20 percent of overall applications. So, it’s good to know what mischief the FHA is up to.

FHA published the notice, Partial Claim Electronic Delivery Alternative Demonstration (Docket No. FR-6474-N-01) in the Federal Register, announcing the Partial Claim Electronic Delivery Alternative Demonstration (the Demonstration). This provides mortgagees who elect to participate the ability to submit digital copies of partial claim promissory notes and subordinate mortgages (PC Documents) to FHA in lieu of original documents. Mortgagees would retain the original documents. Through the Demonstration, FHA intends to reduce the costs and burdens for mortgagees associated with delivering original PC Documents to HUD. FHA will announce the effective date of the Demonstration in a subsequent Federal Register notice and will publish a Mortgagee Letter with implementation guidance for the Demonstration. Stakeholders are encouraged to thoroughly review the notice and provide comments, if any, through February 3, 2025, following the methods outlined in the notice.

FHA published Mortgagee Letter (ML) 2024-25, Extension of the Foreclosure Moratoriums in Connection with Hurricanes Helene and Milton. The moratoriums will remain in effect through April 11, 2025. Mortgagees are required to implement this policy immediately. Read today’s press release for more information.

FHA published Mortgagee Letter (ML) 2024-23, harmonizing FHA’s cyber incident reporting requirements with those of the federal banking agencies. Effective immediately, FHA-approved mortgagees must notify the Department of Housing and Urban Development (HUD) as soon as possible, but no later than 36 hours after determining that a reportable cyber incident has occurred via the FHA Resource Center at answers@hud.gov as well as HUD’s Security Operations Center at cirt@hud.gov. This updated guidance supersedes FHA’s previous guidance in ML 2024-10, dated May 23, 2024, and serves to balance FHA’s need for swift, defensive information while minimizing the operational burden on affected partners. FHA will remain committed to industry harmonization as federal cyber incident reporting standards continue to evolve.

FHA published Mortgagee Letter 2024-21, 2025 Nationwide Forward Mortgage Limits, which provides the maximum mortgage limits for FHA-insured Title II forward mortgages for calendar year (CY) 2025.

FHA issued a limited waiver of its policy regarding Early Payment Default (EPD) review requirements. This waiver applies to FHA-insured mortgages located in Presidentially-Declared Major Disaster Areas (PDMDAs) affected by Hurricane/Tropical Storm Helene and/or Hurricane Milton.

Ginnie Mae introduced a new monthly disclosure that provides detailed information on loans in active Ginnie Mae mortgage-backed securities (MBS) with rural borrowers. Effective immediately, the disclosure will be available on the sixth business day of every month. In collaboration with the U.S. Department of Agriculture (USDA) and USDA geographers, Ginnie Mae developed the data parameters for this initiative, focusing on accurately defining rural borrowers. Using the USDA’s Rural-Urban Commuting Area (RUCA) Codes, they determined that borrowers residing in RUCA codes 4 through 10 would be classified as rural. Ginnie Mae will disclose the number of loans at the MBS level with rural borrowers and the percentage of unpaid principal balance represented by these loans.

Capital Markets

As widely anticipated, the Federal Reserve concluded 2024 by cutting the federal funds rate by 0.25 percent at its December meeting, marking the third consecutive rate reduction. This follows a similar cut in November and a 50-basis points reduction in September, bringing the cumulative rate cuts for the last quarter to one percentage point. The Federal Open Market Committee (FOMC) emphasized that economic growth remains “solid,” though the labor market has “generally eased” over the past year. Meanwhile, inflation, though declining, continues to trend slightly above the Fed’s 2 percent target. Notably, the December statement signaled a likely slowdown in the pace of rate cuts for 2025, committing to evaluate “the extent and timing” of future adjustments.

Inflation has moderated significantly since its peaks in 2022 and 2023 but remains above target. The Fed’s preferred measure, the Personal Consumption Expenditures (PCE) Price Deflator, has ranged between 2.1 percent and 2.8 percent in 2024, a marked improvement from 3.8 percent in 2023 and 6.6 percent in 2022. Core PCE inflation, which excludes volatile food and energy prices, has also eased, consistently staying below 3 percent since February. Concurrently, the labor market has softened, with the unemployment rate averaging 4.2 percent in the latter part of 2024, up from historic lows of 3.5 percent in late 2022 and early 2023. This backdrop of easing inflation and a loosening labor market has led the Fed to balance its focus between mitigating price pressures and addressing potential risks to overall employment.

Looking ahead, the Fed’s ability to chart a clear path for interest rates is potentially complicated by the economic policies anticipated from the incoming administration. President Trump’s second term, coupled with a Republican-controlled Congress, is likely to introduce a mix of tax cuts, increased tariffs, and stricter immigration policies. These measures could stimulate economic growth but also drive inflation higher and tighten the labor market. While the Fed is aware of these potential shifts, the timing and magnitude of policy implementation remain uncertain, limiting their ability to account for these factors in near-term decision-making. Although President Trump has expressed a desire for faster rate cuts, his influence over Fed policy remains limited in the near term. This dynamic could shift in 2026 if he appoints a new Fed chair more aligned with his policy preferences, potentially setting the stage for further shifts in the central bank’s trajectory.

Despite these uncertainties, the Fed’s updated December “Dot Plot” reflects a more cautious approach. Compared to the September projections, the Fed now anticipates only 50-basis points in rate cuts for 2025, down from the previously expected 100. Inflation projections for PCE and core PCE have been revised upward to 2.5 percent, while unemployment and real GDP forecasts have seen modest adjustments. Even with slower rate cuts, the Fed would keep rates in moderately restrictive territory next year, tempering potential boosts to credit-sensitive sectors such as housing and manufacturing. However, rising business optimism following the election, spurred by expectations of pro-business policies, could counterbalance the effects of tighter monetary policy. This “animal spirits” effect may stimulate job creation, risk-taking, and spending among affluent consumers, providing a tailwind to economic growth.

Following yesterday’s Fed events, markets will digest the latest monetary policy decisions from the BoJ (unchanged), Sweden’s Riksbank (25-basis points cut), Norges Bank (unchanged), and Bank of England (unchanged) before the New York open. The busy U.S. calendar is under way with the final look at Q3 GDP, weekly jobless claims (220k, lower than expected), and Philadelphia Fed manufacturing for December. Later this morning brings existing home sales, leading indicators for November, KC Fed manufacturing for December, Treasury announcing next week’s laundry list of supply and month-end coupons (comprised of $69 billion 2-year, $70 billion 5-year, $44 billion 7-year notes, and $28 billion reopened 2-year FRNs before auctioning $22 billion reopened 5-year TIPS), and Freddie Mac’s Primary Mortgage Market Survey. Today is also 48-hour notification for Class D TBAs. Phew!

We begin the day with Agency MBS prices worse .125-.250 from Wednesday evening, the 2-year at 4.31, and the 10-year yielding 4.54 after closing yesterday at 4.49 percent.