11.6.23 Data Breach Costs; Why Rates Have Dropped; What to Look Forward to This Week

Today's podcast is brought to you by nCino, makers of the nCino Mortgage Suite for the modern mortgage lender. nCino Mortgage Suite's three core products -- nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics -- unite the people, systems, and stages of the mortgage process. See how nCino can support a homeownership journey that your borrowers and your team will love at nCino.com.

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Do you use make up? Charles Revson of Revlon observed, back in the days when you could observe these things, "In the factory, we make cosmetics; in the store, we sell hope.” Informed mortgage people know that hope is not a strategy, and companies can’t hope that they’re never the victim of a hack. Here in the Dallas, Texas, area, headquarters of Mr. Cooper, the company was hit with a cyberattack forcing it to lock down its systems and impacting thousands and thousands of clients of hundreds of lenders whose clients rely on them. I don’t know if live-time cyber-attack maps are for real, but they are mesmerizing. Be careful out there! As of 2023, the average cost of a data breach in the United States amounted to $9.48 million dollars, up from 9.44 million U.S. dollars in the previous year. The global average cost per data breach was 4.45 million U.S. dollars in 2023. (Today’s podcast can be found here, and this week is sponsored by nCino makers of the nCino Mortgage Suite. With three products tailored to the needs of the modern mortgage lender, nCino Mortgage, nCino Incentive Compensation, and nCino Mortgage Analytics unite the people, systems, and stages of the mortgage process.)

Lender and broker software, products, and services

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How to Avoid Racial Redlining: A Lesson from a Recent $9 Million Redlining Suit. The Department of Justice (DOJ) continues to fulfill Attorney General Merrick Garland's 2021 promise that his department would “spare no resources” in upholding fair lending laws. In fact, over the past two years, its Combatting Redlining Initiative has secured $98 million in agreements with banks from Los Angeles to Newark, N.J. Most recently, the DOJ settled a $9 million redlining suit with a $7 billion-asset Rhode Island bank. While most financial institutions do not deliberately engage in racial redlining, regulators and the DOJ don’t care about a financial institution’s intentions. They care about its impact. They also want every institution, big and small, to have a strong fair lending compliance program. In a new article from the experts at Ncontracts, learn how to avoid redlining, with lessons learned from recent settlements. Read the full article for more.

Fall into a bigger Pipeline with November Specials from LoanStream Mortgage! Here for a limited time through November 30th, 25 BPS off Non-QM, Conventional and Government loans. Talk with your AE to learn more or visit here for details. Plus, gain the knowledge you need to expand your market with Closed End Seconds by joining our webinar this month, we’ll review how to price, and submit these types of loans to help you thrive and compete in today’s mortgage environment. Register now as space is limited.

“Resilient. That’s the word that comes to mind when considering the excellent companies and professionals who make up today’s mortgage finance industry. As we approach the end of 2023, we offer our sincere appreciation for the incredible people who create the fabric of that industry. To all our customers, business partners and industry friends, we are grateful for your business and the opportunity to meet your banking needs. Western Alliance Bank Specialized Mortgage Services delivers a customized package of treasury management solutions and warehouse lending, MSR financing, note financing and other mortgage finance products, all offering custom-tailored solutions, speed to approval and certainty of execution. Our team is always happy to discuss how we can continue to help you. Many thanks from Steve Curley, David Bernard, Mark Short, Nick Richards, Nicole Avey, Elizabeth Mix, Jim Karr, Chris Martin and the entire Specialized Mortgage Services team. Western Alliance Bank, Member FDIC.”

“If you’re looking for opportunities to expand your business, check out Axos Bank’s Wholesale & Correspondent Lending program. It offers an array of buy-before-sell options, including Reverse Exchanges. Join our free Webinar Week Nov. 6-10 to gain actionable mortgage origination tips. Each day features a new 30-minute webinar. View the lineup and register online today. Or connect with us at the NAR conference in Anaheim on Nov. 14-16. We’re scheduling meetings for Tuesday afternoon and all-day Wednesday and Thursday. Contact J Shoop, National Sales Director, to schedule a meeting. Our Residential Warehouse Lending Team is also available to provide strategic direction to help you grow. Schedule a call today! Email Eric Nelepovitz or call 888-764-7080 to learn more about our warehouse program.”

Knock leverages Maxwell Fulfillment’s flexible processing services to power its innovative lending solutions without adding fixed costs: Here’s how. Knock sets itself apart as a provider of innovative lending solutions that enable homeownership even in challenging markets. To adjust its fulfillment operations to meet fluctuations, Knock uses Maxwell Fulfillment’s flexible, 100 percent onshore processing talent. With an average of over 11 years of experience across multiple loan types, Maxwell processors are quick to get up to speed and ensure fast, accurate results while supporting a variable cost model. “Knock is committed to supporting homeownership within America’s communities no matter the market challenges—and Maxwell Fulfillment’s flexible services help us in that mission,” says Jamie Glenn, Knock Co-founder, and COO. Click here to read the full customer story.

Fill up your pipelines. Imagine being prepared to take the volume without having to staff up! Partner with an expert 3rd party originations team to reduce costs and expedite closings. Computershare Loan Services (CLS) has provided mortgage fulfillment for over 20 years with highly trained and experienced processors, underwriters, closers, and post-closers. They take the overhead burden off your shoulders so you can focus on building your business. Contact the team at Computershare Loan Services. They can help you stay one step ahead.

They say sugar brings happiness, but I bet after a week of eating Halloween candy our tummies aren’t feeling so happy. Here is something sweet to keep you on that sugar high. While many of us are working hard to finalize our 2024 budget, Subsequent QC (SQC) and MQMR just published their 2024 Subservicer Audit Calendar. Schedule your subservicer audit before year-end and SAVE MONEY now when you lock in early bird pricing. Spoiler alert: it's a requirement to audit your subservicer annually so reach out to MQMR to learn more about our detailed audits and how we can help you budget for compliance!

United Airlines made headlines recently when it announced plans to board passengers with window seats first to save time. It feels radical because linear, back-to-front boarding remains the norm, despite having been proven ineffective years ago. I can’t help seeing similarities to the way lenders continue to originate loans using outdated, queue-based workflows full of well-documented bottlenecks. Everyone agrees there has to be a better, faster way, but few are bold enough to make a change. In his latest blog, Dark Matter Technologies Managing Director Craig Rebmann explains exactly why and how task-based workflows get loans to the finish line more quickly than linear ones. Read it here, then ask yourself: are you going to do what everyone else is doing, or are you going to do what actually works?

Government (FHA, VA, & USDA) news from around the biz

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Get “Back to Basics” with the Single Family Housing Guaranteed Loan Program in its first live, virtual training for fiscal year 2024. “100 percent financing with zero down payment? Why, yes you CAN! Learn about the USDA Single Family Housing Guaranteed Loan Program and how it can expand your loan portfolio…It's as easy as 1-2-3!”

On October 30, USDA Rural Development posted a notification of Interest Rate Increase for SFH Direct Programs.

FHA posted a draft Mortgagee Letter (ML), Updates to the Home Equity Conversion Mortgage (HECM) Program on its Single-Family Housing Drafting Table (Drafting Table) web page for public feedback. This ML proposes revisions to and streamlining of HECM servicing policy to enhance the program’s financial stability, improve overall performance, and reaffirm FHA’s commitment to the senior citizen population that is served by the HECM program. For more information, view the Press Release.

FHA published Mortgagee Letter (ML) 2023-18 updating the policy exception announced in ML 2020-48, that established an exception to the traditional comparable sales selection requirements for manufactured homes certified under the Government Sponsored Enterprises (GSE) Fannie Mae’s MH Advantage™ and Freddie Mac’s CHOICEHome® programs.  This update now requires appraisers to use the most appropriate site-built-home comparable sales when there are less than two comparable sales of these GSE-certified manufactured homes available. This update supports FHA’s efforts to increase the availability and affordability of manufactured housing and further aligns FHA policy with the Biden-Harris Administration’s Housing Supply Action Plan. 

FHA announced the publication of consolidated Home Equity Conversion Mortgage (HECM) sections of the Single-Family Housing Policy Handbook 4000.1 (Handbook 4000.1). Through this update, Handbook 4000.1 now contains policies for the entire FHA Single Family Housing Program, including comprehensive and authoritative policies for the HECM program. The new HECM sections consolidate existing program guidance currently found in over 100 Mortgagee Letters, various handbooks, the HECM Financial Assessment and Property Charge Guide, and various other policy materials. The sections contain revisions to policy for clarity, consistency, and to conform to the published Handbook 4000.1 organizational structure. View Press Release FHA INFO 23-248 for details.

FHA’s Mortgagee Letter 2023-19, Extension of the Foreclosure Moratorium in Connection with the Presidentially Declared Major Disaster in Maui County, Hawaii, instructs mortgage servicers to halt all foreclosure actions in Maui County through at least May 6, 2024. Read FHA’s November 2nd Press Release, HUD No. 23-252, for completed details.

On October 31st, Pennymac posted Announcement 23-74 stating that effective immediately, Pennymac will no longer accept VA adjustable-rate mortgages (ARMs) with temporary buydowns.

PRMG Product Update 23-50 provides information on previous USDA loss clarification and updated gift sourcing requirements. Removal of Chenoa Fund FHA requirement that all investment properties must be impounded (escrowed), added product codes for High Balance with the 3.5 Forgivable option: Chenoa 30 Year FHA Fixed Low AMI High Balance with 3.5 percent Forgivable option and Chenoa 30 Year FHA Fixed High AMI with High Balance 3.5 percent Forgivable option.

Capital markets: maybe we have seen the highs of rates…

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Chris Bennett of Vice Capital Markets just put out a webinar on successfully navigating and trading the kind of ‘special’ markets we have had at times this year and last. Most of this webinar consists of real-live examples in the MBS markets from last month, explaining how to correctly find full and fair value in mid and higher-coupon MBS prices using the highly liquid Treasury instruments that MBS pricing is derived from minute-by-minute during the trading day. No registration or email address is required. Link to the free 30-minute webinar here.

Last week’s economic data pointed towards slowing momentum in the fourth quarter. Nonfarm payrolls increased by 150,000, lower than market expectations, and the prior two months were revised down by a total of 101,000. The unemployment rate increased to 3.9 percent in October, which is still low compared to historical averages, but higher than the current cycle low of 3.4 percent reached in January 2023. Labor productivity grew at a 4.7 percent annualized rate in the third quarter while unit labor costs declined at an annualized 0.8 percent during the quarter. This can be seen as a sign that inflation is continuing to decline towards the Fed’s target.

Although the U.S. economy is primarily driven by jobs and housing, but higher interest rates are weighing on manufacturing activity which pulled back in October according to the ISM manufacturing index. Although the UAW strike influenced the numbers, most of the subcomponents in the index contracted. Multifamily construction fell in September as high financing costs combined with increasing vacancy rates contributed to the slowdown. Mortgage rates benefited from a slightly less hawkish Fed combined with weaker than expected data as the general sentiment is that the Federal Reserve has reached the end of its tightening cycle.

The Fed's tightening is gaining traction, and the central bank has likely concluded its series of interest rate hikes. That’s the current narrative across bond markets as below-consensus average hourly earnings growth and an uptick in the unemployment rate from Friday's October U.S. Payrolls report paint an overall picture of a cooling U.S. job market. Nonfarm payrolls rose 150k in October compared to consensus expectations of a 180k increase. The unemployment rate rose to an almost two-year high of 3.9 percent, indicating strong demand for workers is cooling off. There is the possibility that the UAW strike introduced some noise into the report; walkouts due to the UAW strike reduced payrolls by roughly 30k. The U.S. 10-year Treasury benchmark dropped by 12 basis points on the report, and the fed funds futures now peg the chance of a December hike at only 10 percent.

This week will see increased roll trading between the release of the October prepayment data after the close today and monthly TBA settlements which kick off with 48-hour notification Thursday for Class A. The week’s economic calendar is slow, while Treasury coupon supply ramps up with the $112 billion Quarterly Refunding over Tuesday through Thursday in addition to the usual bill auctions.

As for today’s economic calendar, there is just the Employment Trends Index for October, due out later this morning. Highlights from the rest of the week include international trade, consumer credit, and preliminary November consumer sentiment on Friday. There are also a number of Fed appearances which could provide more thoughts on December and beyond. We begin the week with Agency MBS prices better by about .125 from Friday’s close and the 10-year yielding 4.59 after closing last week at 4.56 percent.

Folks wonder what I do to warm up in order to put out this Commentary every day. Here’s something to give you a sense of it.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. STRATMOR’s current blog is titled, “Mind the Down Payment.”  The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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