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Zillow’s bond gamble; UWM speedy approvals; Mortgage rate spike 🤔

By September 28, 2021 September 29th, 2021 No Comments

What could go wrong? Zillow is bonding homes not even sold yet

Zillow is best known for the addictive real estate listings that keep people browsing the internet all night, checking out interior shots of homes for sale or the estimated prices of their own houses or the ones down the street.

But Chief Executive Officer Rich Barton has staked his company’s future on a bet that its software can also ease a critical pain point for U.S. homeowners: the time it takes to sell.

In recent years, Zillow has essentially dived into the house-flipping business, offering to quickly take properties off sellers’ hands. And in the process, it’s helping pull Wall Street even deeper into the $2 trillion U.S. housing market.

In August, Zillow raised $450 million from a bond backed by homes it’s bought but not yet sold.

The offering, led by Credit Suisse Group AG, was modeled on the loan facilities that car dealerships use to finance floor models.

The novelty of using that structure for houses didn’t scare off investors hungry for a new way to bet on the hottest housing market on record. The offering was over subscribed and Zillow, which declined to comment on its bond market activities, is now in the process of selling another $700 million in bonds.  (Bloomberg paywall.)

More such offerings are almost certainly coming.

Zillow is one of a growing field of tech companies, often known as iBuyers, who are taking advantage of the surge in investor demand to fund purchases of houses.

They’re still a small part of the overall market, but as the mortgage meltdown of 2007-2010 showed in the extreme, the mix of housing, easy money, and new forms of financing can be combustible.

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United Wholesale promises mortgage approval in 15 minutes

United Wholesale Mortgage has just launched BOLT, a self-service platform that provides the ability to get initial approval for qualified borrowers in just 15 minutes. 

“We’ve demonstrated time and time again with our proprietary technology, including UClose, our InTouch Mobile app, and one-click AUS, that we’re leading the way to making the loan process faster and easier without compromising quality in any way,” said Ishbia in a statement

“With BOLT, brokers will now have the control, speed and certainty they need to get loans to the closing table faster than ever before.”

The new feature can be found in UWM’s loan origination system, EASE. When brokers upload a loan application with required documentation, they will then be able to elect to use BOLT. 

This will provide them with a step-by-step process that will allow them to complete the initial approval when it’s convenient for them, creating a faster experience and fewer underwriting touches.

“We’re going to remember BOLT as a significant development in the mortgage industry that forever changed the way underwriting is done,” said Ishbia. 

“UWM built this technology, which uses things like doc recognition and indexing,” he added. “This will allow initial approval of the file to be completed in minutes rather than hours, while also ensuring guardrails and quality standards are in place, as they always are with UWM, to close clean loans.”

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If the government defaults on its debt, some worry mortgage rates will spike

The Senate is scheduled to vote on the House-passed government funding bill, but its fate remains uncertain with Republicans threatening to block the measure

Lawmakers have until the calendar turns to Friday to approve funding for the government or a shutdown will be triggered.

The sticking point is the inclusion of a debt ceiling increase in the funding bill, which Republicans say they are unwilling to support and are demanding that Democrats take the political heat for the increase.

The Treasury Department has said the debt limit will be breached sometime in October if it's not lifted, warning of consequences for the U.S. economy.

If this happens, according to a report by Moody’s: “Treasury yields, mortgage rates, and other consumer and corporate borrowing rates spike, at least until the debt limit is resolved and Treasury payments resume,” the report said on Wednesday, describing the effects of the U.S. defaulting on its debt. 

Andit wouldn’t be a short-term spike, said Mark Zandi, Moody’s chief economist and lead author of the report. Rates would remain elevated even after a resumption of payments as investors add a risk premium that would elevate the yields for both Treasuries and the mortgage bonds that track them.

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