The bank agrees to a $9 million, five-year settlement.

Washington Trust has agreed to a settlement with the Department of Justice alleged redlining or discriminating practices against communities of color by not providing them with services, as reported in an article by The Providence Journal.

In a complaint filed to the federal District Court, the Rhode Island US Attorney’s Office said that the bank did not provide Black and Hispanic residents with their services in Rhode Island between 2016 and 2021.

Allegations of discrimination

The complaint outlined that Washington Trust had set the entire state of Rhode Island as its target area and began an expansion by opening of more branches. US Attorney Zachary Cunha argued that when the bank established this goal, its market should have included the majority Black and Hispanic neighborhoods in the state.

However, Clarke said that the bank never opened branches within majority Black or Hispanic communities. The complaint also said that there were nearly no mortgage officers working at the bank that spoke in Spanish and its website was also largely not translated in Spanish.

In 2011, Washington Trust was reported to have known about such discrimination issues from its internal compliance team as well as outside consultants that it had hired to conduct risk assessments.

“Washington Trust took no meaningful action in response to these reports indicating that it was underserving Black and Hispanic borrowers and majority-Black and Hispanic neighborhoods, despite having knowledge of its underperformance and its redlining risk,” the complaint read.

Washington Trust stated in an unsigned written statement that it denied the allegations and only agreed to the settlement in order to avoid the expenses and the distraction that came with the potential of litigation.

Ned Handy III, the bank’s CEO, wrote that Washington Trust had been compliant with federal fair lending laws and it had several people at the bank that can speak languages besides English.

The $9 million settlement money will be broken into three categories:

• $7 million to help would-be buyers
• $1 million (at $200,000 a year) for groups that help people in majority Black and Hispanic census tracts with credit, financial education, homeownership and foreclosure prevention
• $1 million in advertising, outreach, consumer education and credit initiatives

The tentative agreement has yet to be approved by a federal judge in order for the settlement money to be allocated in affected areas.

Report follows news of decline in homebuyer affordability.

Contract signings to buy previously owned homes declined to their lowest level since April 2020, according to new data from the National Association of Realtors (NAR).

A decrease of 7.1% in NAR’s Pending Home Sales Index to 71.8 has been noted on the back of sky-high mortgage rates. According to Bloomberg, the decline was larger than all estimates in a Bloomberg survey of economists. Pending sales were down 18.7% year over year.

“Some would-be home buyers are taking a pause and readjusting their expectations,” Lawrence Yun, chief economist at NAR, said in a statement. “It’s clear that increased housing inventory and better interest rates are essential to revive the housing market.”

High mortgage rates continue to impede housing market

​Homebuyer affordability declined in August. The average mortgage payment increased to $2,170 in August, up 18% year over year, according to data from the Mortgage Bankers Association.

Concurrently, existing home sales decreased slightly by 0.7% in August to a seasonally adjusted annual rate of 4.04 million units. These are counted at the closing of a contract. Sales fell in the South and West. They increased in the Midwest and were unchanged in the Northeast.

Economists describe the current mortgage rates as being at a 20-year high. A Reuters report noted the housing market had shown signs of stabilizing following the Federal Reserve’s aggressive monetary policy tightening. However, elevated mortgage rates have put pressure on the market. Homebuilder confidence declined to a five-month low in September, while housing starts in August dipped to their lowest levels since mid-2020.

Fueling the pressure on the market is the rise in US Treasury yields amid worries that surging oil prices could hinder the Fed’s fight against inflation.
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The US central bank left its benchmark overnight interest rate unchanged in the 5.25%-5.50% range earlier this month. However, another hike is expected by year end and monetary policy is anticipated to stay tight through 2024.

One-third of the supply needs to be taken out of office real estate, CEO says.

The commercial real estate market is expected to slip further as the market continues its underperformance given that US workers are still reluctant about their full time return to the office, said Katie Koch, CEO of TCW group, as reported in an article by Bloomberg.

“One-third of the supply has to be taken out of the office market,” said Koch at CNBC’s Delivering Alpha conference on Thursday.

Koch also pointed out that $1.5 trillion worth of commercial mortgage-backed securities were maturing soon and they needed to be extended.

What is going on with the commercial real estate market?

​With the shift to hybrid work, along with rising interest rates and the difficulty in accessing credit following a regional banking crisis, the commercial real estate market had been deeply affected.

According to a report published by the National Association of Realtors regarding the state of the commercial real estate market in July 2023, office space vacancy rates rose 13.5% compared to the same time in the previous year.

The industrial sector of commercial real estate also slowed compared to the previous year. Net absorption was reportedly 40% less than it was in 2022. The industrial vacancy rate was raised to 5.4% and moderated rent growth raised to 7.2%. Despite this, rental costs for industrial spaces continued to rise faster than before the pandemic.

Still, Koch remained optimistic about how there were still a number of good properties that piqued the interest of employers who were trying to get their workers to return to the office.

She also believes that the economy is more likely to deteriorate than the consensus opinion, and that an upcoming recession is inevitable since interest rates continue to rise and place pressure on consumers.

Freddie Mac reveals the latest.

Mortgage rates in the US climbed to the highest since 2000, ramping up the pressure on potential buyers.

The average for a 30-year, fixed loan rose for a third week, reaching 7.31%, up from 7.19% last week, Freddie Mac said in a statement Thursday.

Mortgage rates topping 7% for the past seven weeks are hurting affordability for buyers and weighing on purchases. Contracts to buy previously owned homes slipped 7.1% in August from a month earlier, according to National Association of Realtors.

“Unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory,” Sam Khater, Freddie Mac’s chief economist, said in the statement. “These headwinds are causing both buyers and sellers to hold out for better circumstances.”

Tightening inventory pushed home values to a record high in July, according to data released this week by S&P CoreLogic Case-Shiller. But price growth may have its limits. For the four weeks ending Sept. 24, sellers dropped prices on roughly one in 15 homes for sale, the highest level since November, according to Redfin Corp.

A buyer with a $600,000 mortgage would be paying $4,118 a month at this week’s average rate, 58% more than in early 2022, before the Federal Reserve started hiking its benchmark rate. 

Buying a starter home is now more expensive than renting in all but three of the 50 top metro areas in the US, according to a Realtor.com study.
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That “explains why buyer demand is likely to remain relatively low,” Realtor.com’s Chief Economist Danielle Hale said in a statement.

Economist notes mortgage rates are at a 20-year high.

​The Market Composite Index, a measure of mortgage loan application volume, decreased by 1.3% on a seasonally adjusted basis from a week earlier, according to new data from the Mortgage Bankers Association (MBA).

The composite index, on an unadjusted basis, decreased 2% compared to a week before. The refinance index decreased by 1% from a prior week. The seasonally adjusted purchase index also went down by 2% from a week earlier. The unadjusted purchase index decreased 2% compared to the previous week.

MBA noted all these results emerged amid elevated mortgage rates, which have been described as being at their 20-year high.

“Mortgage rates moved to their highest levels in over 20 years as Treasury yields increased late last week,” said Joel Kan, vice president and deputy chief economist at the MBA. “The 30-year fixed mortgage rate increased to 7.41%, the highest rate since December 2000, and the 30-year fixed jumbo mortgage rate increased to 7.34%, the highest rate in the history of the jumbo rate series dating back to 2011.”

Kan said mortgage rates are expected to remain high for a good while yet. Consequently, overall applications have dipped with homeowners and prospective homebuyers growing reluctant.

“The purchase market, which is still facing limited for-sale inventory and eroded purchasing power, saw applications down over the week and 27% behind last year’s pace. Refinance activity was down over 20% from last year and accounted for approximately one third of applications. Many homeowners have little incentive to refinance,” said Kan.
Other highlights of the report:
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• FHA applications decreased to 14.1% from 14.2%.
• VA applications inched down slightly to 10.9% from prior week’s 11%.
• USDA applications slightly increased to 0.5%.
• The refinance share of mortgage activity increased slightly to 31.9%.
• Adjustable-rate mortgage (ARM) activity share rose to 7.5%.

Economists note supply is essential in balancing the market.

US new single-family home sales dropped to a five-month low as elevated rates continue to put pressure on the housing market, according to Census Bureau data.

The recent data released revealed the purchases for new single-family homes plunged by 8.7% to 675,000 in August. July saw much higher sales at 739,000 units sold.

“New single-family home sales fell by 8.7% in August to a seasonally adjusted annualized rate (SAAR) of 675,000, but this followed a meaningful upward revision for the July figure of 25,000 to 739,000 SAAR units,” said Doug Duncan, chief economist at Fannie Mae. “July sales were the highest since February 2022. In terms of the supply of listings, the months’ supply jumped eight-tenths to 7.8, the highest since March. The supply of new homes for sale rose 1.2% to 436,000. Of note is that the inventory of completed homes for sale continued to climb and is now at the highest level since April 2020.”

Elevated mortgage rates keeping buyers reluctant

A Bloomberg report said builders have been offering incentives to partially offset some of the pressures on sales, and yet elevated mortgage rates continue to keep prospective buyers at bay. Some even had to cancel deals.

“August was the first month in which sales experienced mortgage rates near or above 7% since last November, which likely explains part of the decline,” said Duncan. “The drop was consistent with the recent decline in the homebuilders’ sentiment survey, as well – although some of this month’s sales drop may be give-back from the strong July reading. The July and August numbers are in line with our current outlook for Q3, though further increases in mortgage rates point to additional softening and pose downside risk to our outlook.”

The Federal Reserve has left its benchmark overnight interest rate unchanged in the range of 5.25%-5.50%. However, the central bank is projecting another hike by year end and monetary policy staying significantly tighter through 2024 than previously expected.

A Reuters report said homebuilder confidence went down to a five-month low in September, while housing starts in August dropped to levels last seen in mid-2020.

The median sales price of a new home nudged slightly down to $430,300, but the number is still well above pre-pandemic levels. New single-family home inventory was 436,000 in August, equating to 7.8 months’ supply at the current building pace.

A separate report showed a national gauge of home prices in the US reached a record high in July.

“Home prices continue to march higher despite lower home sales,” Lawrence Yun, chief economist at the National Association of Realtors, told Reuters. “Supply needs to essentially double to moderate home price gains.”

Holden Lewis, home expert at NerdWallet, said buyers should look out for offerings of incentives from builders.
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“August saw a drop in sales of new homes, but they’ll bounce back soon enough,” said Lewis. “The inventory of unsold new homes is at its highest since December, and builders will be motivated to offer incentives to get them sold. Look for a resurgence of mortgage-rate buydowns, in which the sellers give buyers a break on the monthly payments for the first one to three years.”

Applications hit once more.

US mortgage rates jumped last week to the highest level since 2000, taking a toll on already depressed home-purchase applications.

The contract rate on a 30-year fixed mortgage rose 10 basis points to 7.41% in the week ended Sept. 22, according to Mortgage Bankers Association data out Wednesday. As a result, the index of home-purchase applications fell to 144.8, one of the lowest readings in decades.

The latest pickup in borrowing costs is making the housing market — already one of the least affordable on record — even worse. Despite elevated financing costs, home prices continue to rise amid the limited supply of homes for sale. 
Part of the reason for that lean inventory is because many homeowners don’t want to move in the current high-rate environment. Moving would cause them to lose the lower mortgage rate they locked in years prior. 

Builders have stepped in to replenish housing inventories and have been offering incentives to attract prospective buyers to the new construction market. But there’s only so much demand they can attract when borrowing costs are so high.

The overall measure of mortgage applications, which includes refinancing activity, also declined.
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Mortgage rates are unlikely to show any improvement in the near future. Federal Reserve Chair Jerome Powell stressed last week that the central bank will keep borrowing costs elevated — and could possibly bump them even higher — if inflation fails to recede back toward its 2% target.
The survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.

Its occupancy rate is 97.1% with 25 renters vying per vacant unit.

Miami’s rental market continued to be the most competitive out of 139 markets in the US, as shown in a report by RentCafe.com.

For every vacant unit in Miami, there were 25 prospective renters, it revealed. The Miami rental market also had a 97.1% occupancy rate with average vacant days for a unit standing at 30. It had a lease renewal rate of 73%.

Milwaukee emerged as the second most competitive market during the peak rental season, which was a large jump from its previous seventh place. The average number of vacant days for a unit was the same as Miami and it had 16 prospective renters competing for every apartment.

Elsewhere, Manhattan has joined the top 20 competitive rental markets for the first time in nearly two years. It had an occupancy rate of 94.7% while it had no newly opened apartments recently. Brooklyn had a higher occupancy rate as it reached 96% during the peak season while it only had a 0.16% increase in its rental unit supply.

San Diego, meanwhile, is now California’s most competitive rental market, beating Orange County with its 96% occupancy rate and 17 prospective renters for every available unit. It only had 51.3% of lease renewals and the average number of days it took for apartments to be filled was 33.

The state of the US rental market

Compared to the previous year, the US rental market was a lot less competitive during the peak rental season of 2023. The number of renters that were competing for a vacant apartment dropped from 15 in 2022 to 10 in 2023.

The post-pandemic apartment construction boom continued this summer - however, it did so at a slower pace compared to the same time in the previous year.

There was only a 0.57% increase in supply, contrasting with the 0.67% during the high season in 2022. This contributed to slightly lower occupancy rates (94% in 2023, 95% in 2022), a longer number of days with rental units staying on the market (37 days in 2023, 32 days in 2022), and a reduced number of lease renewals (60.5% in 2023, 63% in 2022).

RentCafe.com’s report analyzed 139 rental markets across the US using Yardi Systems apartment data. Each market was ranked based on a market competitive score that was calculated according to five metrics (apartment occupancy rate, average total days vacant, prospective renters per vacant unit, renewal lease rate, and share of new apartments completed during the same timeframe) and the averages each market had from April until June 2023.

Elevated interest rates impacting tech-based mortgage lender

​Just weeks after going public, tech-based mortgage lender Better issued pink slips to employees in a new round of layoffs.

An Insider report said the company’s stock debut is a result of a special purpose acquisition company (SPAC) merger with Aurora Acquisition Corp., and it would give the lender access to at least $565 million in capital, which would be used to improve the company as it waits for mortgage demand to pick up.

On the first day of trading on August 24, the shares of the newly formed company plummeted 93% from where Aurora had traded the day before. Meanwhile, the shares of Nasdaq-listed Better Home & Finance, excluding Aurora’s stock price, plunged by over 59% from the opening day.

Better subsequently laid off about a quarter of its US mortgage sales and origination team, which underwrites the company’s mortgage loans, leaving only about 75 team members both in the US and India.

Jessica Schaefer, a spokeswoman for Better, told Insider in an emailed statement the company plans future hires.

“New projections and remarks from chair Jay Powell signal no near-term relief from elevated borrowing costs, so the mortgage market will continue to get tougher,” said Schaefer. “We are hiring more seasoned professionals who can sell in this tough mortgage environment and then making them 10x more productive through our technology.”

High interest rates impacting lenders

Better was founded in 2015 by Vishal Garg, selling fast, low-fee digital home mortgages. Since founding, it added an in-house real-estate brokerage and now offers title insurance and homeowners’ insurance.

The company’s growth skyrocketed during the pandemic after low-interest rates drove record-high refinancing, resulting in the hiring of 7,000 people. However, interest rates soared last year, causing Better’s purchase loan volume to fall more drastically than the industry as a whole.

From being the nation’s 10th largest mortgage originator in 2021, Better placed 59th place in 2023. It reported a loss of $1.2 billion from 2021-2022 and recorded an additional $135.4 million in losses through the first half of this year.
After going public, Better disclosed nearly half of its originations are generated from its B2B partnerships with companies like Ally Bank and American Express. In the lead up to the closing of its SPAC merger deal, Better said the company would use part of the proceeds of more than $560 million to hire mortgage loan officers, processors, underwriters, and coordinators to partner with real estate agents and expand the business.