Servion Mortgage Newsletter - March 2021

MARCH 2021

In This Issue Experts Expect Another Record Year for Home Sales in 2021 Strengthening Our Infrastructure Fannie and MBA Forecast Purchase Origination Record, Refi Cool Down in 2021 Reminder: New URLA Now in Effect Form 4506-C Replaces Form 4506-T for Income Verification The Buzz: Recent Feedback

Experts Expect Another Record Year for Home Sales in 2021 2020 was a blockbuster year for home sales, but many experts are projecting that there will be even more sales - and even more increases in home values - in 2021.

National Association of Realtors’ chief economist Lawrence Yun predicts new-home sales will jump 21 percent and existing-home sales will climb 9 percent in 2021. He predicts home prices will rise by 3 percent in 2021.

According to Zillow’s Home Value Index, the company expects seasonally adjusted home values to increase by 3.7 percent from December 2020 through March 2021, and by 10.5 percent through December 2021. It also predicts home value appreciation to peak in June 2021 at 13.5 percent.

Approximately 5.6 million existing homes were sold in 2020, a 5.3 percent increase from 2019, according to officials. Zillow predicts 6.82 million existing home sales in 2021, the most recorded in a single calendar year since 2005 and a 21.1 percent increase from 2020.

Quarterly Zillow Home Value Index growth as of December 2020 was 3.2 percent, the strongest three-month appreciation since 1996.

Affordability Will Be a Headwind The downside to the current situation is that buyers will need more money than ever to make a purchase. According to the National Association of Realtors, the median household income of first-time buyers in 2020 was $80,000.

That is up 16.4 percent from the $68,703 median income of first-time buyers in 2019.

Home prices rose at least 10 percent in the fourth quarter across most of the U.S., according to Washington Post reporting. That makes affordability much more difficult. The Post cited a study showing that 275 of 499 of counties were less affordable in Q4 2020. That is up from 217 counties in the same period of 2019 and 164 in the same period of 2018.

Sources: https://www.housingwire.com/articles/zillow-expect-another-record-year-for-home-sales/ https://www.washingtonpost.com/business/2021/01/11/2021-housing-market-predictions/

Strengthening Our Infrastructure 2020 posed unique challenges to Servion Mortgage and our partner institutions. A persistent record-low interest rate environment led to record mortgage and refinance activity across most of the nation, resulting in record business volume which, at times, tested our capabilities. We have learned valuable lessons during this extraordinary period and are applying those lessons to strengthen our company and our partner relationships.

Personnel

Committed to attracting and retaining excellent talent

• Hired approximately 80 new employees since March 1, 2020.

• Added 2 experienced loan officers (retail).

• Currently in the process of doubling the size of our underwriting, processing, closing and correspondent departments.

Leadership

Putting the right people in the right places to support growth

• C-Suite expansion through promotion of Steve Albers to Chief Operating Officer.

• COO and mortgage management working closely to refine processes and increase efficiencies.

Commitments • • • •

Prioritizing our relationship with our partners

Purchases will always be a priority (Realtor® relationships).

Sense of urgency.

Improved/better pricing.

Availability and responsiveness from our staff.

Product

Adding a new product to benefit your borrowers

• New Go2Source Realtor® Referral Network provides you the ability to connect your borrowers with a local real estate agent who is fully vetted and will not steer the borower to another lender.

LEARN ABOUT GO2SOURCE

Fannie and MBA Forecast Purchase Origination Record, Refi Cool Down in

2021

After a record $4 trillion in mortgage originations (purchases and refis combined) in 2020, it’s hard to believe that things won’t slow down at least a little bit in 2021. And yes, economists from Fannie Mae and the Mortgage Bankers Association are forecasting a decline in total origination volume this year, but it won’t be because of purchases.

Economists Expect All-Time Highs for Purchase Originations Amazingly, the purchase market is expected to do even better in 2021 than it did last year. Fannie Mae’s January news release predicts purchase mortgage originations to rise from $1.6 trillion in 2020 to $1.8 trillion in 2021.

Considering 2020’s origination volume was a new record, the idea of breaking that record again in 2021 may seem fantastical, but that’s what the data indicate.

Housing Activity Projections Assume Several Things According to Mike Frantoni, the MBA’s chief economist, the 2021 market forecast assumes the following:

• Vaccines will be effective in bringing the COVID-19 pandemic under control; • There will be further fiscal stimulus; and • These two factors will lead to a gradual economic recovery.

In a press release Frantoni said, “The economy, labor market, and housing market have all seen meaningful rebounds since the onset of the pandemic, but there is still profound uncertainty. Additional waves of the virus could lead to further lockdowns and more job market instability,” he said. “On the other hand, another pandemic-related stimulus package would result in faster economic growth and additional support for the housing market, albeit with slightly more upward pressure on mortgage rates.”

“2021, particularly the second half, should be a year of continued purchase growth and slowing refinance activity,” Frantoni concluded.

Refis Projected to Dip 20 Percent Offsetting the good news in the purchase market is an expected cool down in refinance activity. Fannie’s January release predicts refis will drop from 2020’s record high $2.8 trillion to $2.2 trillion in 2021, a decline of 20 percent.

Fannie’s research group believes than two thirds of outstanding mortgages currently have at least a half-percent point incentive to refinance, but they also expect a “modest rise in interest rates” to slowly decrease the number of homeowners who could benefit from refinancing.

Servion Is Here to Support You in 2021 We grew our total number of employees by over 40 percent in 2020 and are well positioned to help you meet what looks like another year of high demand for mortgage solutions. We look forward to working with you in 2021 and for many years to come!

Sources: https://www.fanniemae.com/newsroom/economic-growth-expected-accelerate-vaccinedeployment-quickens-and-warmer-weather-approaches https://www.mba.org/2020-press-releases/october/mba-forecast-purchase-originations-to-increase-85-torecord-154-trillion-in-2021

REMINDER: NEW URLA NOW IN EFFECT As of March 1, 2021, all lenders who intend to sell closed residential mortgage loans to Fannie Mae or Freddie Mac are required to use the new URLA. We wrote about the background of this change in our last newsletter and we’re providing the information again this month for your convenience.

WHY IS THE URLA CHANGING? The redesigned URLA was spearheaded by Fannie Mae and Freddie Mac (the GSEs). The idea behind the redesign, according to the GSEs, is to have a more consumer-friendly loan application experience while also moving the lending industry closer to digitizing the loan origination process.

RESOURCES FOR URLA INFORMATION Here we want to provide a few links to official sources of information about the new URLA so you can familiarize yourself with the revamped document.

• Fannie Mae’s interactive URLA page • Freddie Mac’s interactive URLA page • Fannie Mae’s list of approved software partners (relevant to Servion correspondent partners using their own LOS) • Freddie Mac’s list of approved software partners (relevant to Servion correspondent partners using their own LOS) • Fannie and Freddie joint data sheet about the new URLA • MBA’s technology tips related to the new URLA Contact Us with Any Questions!

If you have any questions about the new URLA, don’t be afraid to ask. Call your Servion Account Executive any time.

Form 4506-C Replaces Form 4506-T for Income Verification As of March 1, 2021, the IRS’ Income Verification Express Service (IVES) is no longer accepting the 4506-T Tax Transcript Request form.

From now on, only the new IRS Form 4506C will be accepted.

Form 4506-C is the form that must be utilized by authorized IRS Income Verification Express Service (IVES) participants to order tax transcripts electronically with the consent of the taxpayer.

the IRS. It may be necessary to have the borrower complete and sign multiple IRS Form 4506-Cs depending on the transcripts required to validate the income.

1. One to obtain a transcript of the personal 1040 returns; and 2. The second to obtain the business returns.

Additionally, lenders must have each borrower whose income is used to According to the qualify for the loan Fannie Mae Selling complete and sign a Guide, “IRS Form 4506-C can be used to separate IRS Form 4506-C at or before obtain transcripts for up to four years or tax closing. An alternate form is also acceptable periods but only one if it authorizes the tax form number can be requested per each release of comparable tax information from IRS Form 4506-C.” the IRS. It may be Fannie Mae requires necessary to have the lenders to have each So, as an example, borrower complete and borrower whose imagine a borrower sign multiple IRS Form income (regardless of who is self-employed 4506-Cs depending on income source) is used and has income the transcripts required to qualify for the loan documentation to validate the income. to complete and sign covering two years of a separate IRS Form personal tax returns See the IRS website 4506-C at or before and two years of to view Form 4506closing. An alternate business tax returns.

C and to learn more form is also acceptable In this case, the lender about the Income if it authorizes the must complete two Verification Express release of comparable 4506-Cs: Service. tax information from Properly Submitting Form 4506-C

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Thank you so much for your quick underwrite on this file. We pulled it from another investor, so we really appreciate how quickly Servion moved on this – amazing!

I just got off the phone with [the member] and he couldn’t say enough about the excellent service you provided, how quick all the communication was Thank you so much for taking such good care of our members. You rock!

THE

BUZZ

Hear what our partners are saying about us!

I just wanted to say thank you for making my first FHA closing with Servion as smooth as you did – you were on top of everything!

The closing attorney said the same thing, she was impressed with the timeliness of receiving disclosures, etc. for closing.

I appreciate your quick response and remarkable service.

Thank you so much for your assistance in making this process so easy.

SERVICE. SOLUTIONS. SUCCESS. Thank You for Your Loyalty. We look Forward to Supporting You for Years to Come.

651-631-3111 • myservion.com Servion Mortgage is a DBA of Servion, Inc. NMLS #1037. Equal Housing Lender.