5.26.23 Industry Issues; Polunsky Beitel Green's Stacey Maisano on Women in Mortgage Banking; Economy Slowing But Rates Up

Thank you to Black Knight. From point-of-sale through post-closing, the company’s trusted loan origination system, Empower, as well as its integrated, end-to-end origination solutions deliver unmatched capabilities, functionality and support to increase processing efficiencies and lower operational costs for lenders, as well as improve the homebuying experience for borrowers.

Transcript

Did you know that wheat futures prices are at a 2-year low? And lumber prices continue to drop? Those numbers should help reduce inflation. During the conference in NY there was plenty of talk about external influences such as price increases on residential lending. But there are also plenty of issues within our biz that face lenders daily. For example, signing bonuses continue, albeit at a slower rate. Perhaps some of the economic bloom is off the bonus rose? Big signing bonuses come with big handcuffs. It stinks when a competitor takes your production but not your overhead, right? With the help of technology and tracking, a lender’s management can, more than ever, determine whether a given branch or LO is making money for the company, or is merely a source of concessions and extensions. Recruiters sometimes talk of the “greater fool” theory when bad LOs or branches move on to another lender. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. From point-of-sale through post-closing, the company’s trusted loan origination system, Empower, as well as its integrated, end-to-end origination solutions deliver unmatched capabilities, functionality, and support to increase processing efficiencies and lower operational costs for lenders. Hear an interview with Polunsky Beitel Green’s Stacey Maisano on women in the mortgage industry and getting the younger generation involved.)

Employment

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A Louisiana based full-service, independent mortgage banker averaging $1 billion in production annually is searching for a proven retail sales leader to run all business development initiatives. The Sales, Recruiting, and Marketing departments will report directly to this head of business development role, and the role will report directly to the CEO. The ideal candidate will have a demonstrated track record of hiring and managing multiple production offices across several states. The IMB is well capitalized, has agency direct approvals, offers niche products, significant technology advancements and a world-class operations team with experienced, tenured sales and fulfillment employees. For confidential consideration, please email resume to Chrisman LLC’s Anjelica Nixt.

“Logan Finance is blessed to see such incredible growth recently. As we keep count of all the units that drive our business, it's easy to lose sight of all the military units and those individuals who served throughout history to help afford us all the possibilities we have today. As we think of Memorial Day, we should celebrate it as a day that honors all these great opportunities and focus on those who have made the ultimate sacrifice to protect the freedoms we should never lose count of. From the Logan family to yours, ‘Happy Memorial Day.’”

As a mortgage sales professional have you ever thought, “What if I could focus on only the things that actually grow my business, flipping the hourglass and spending 80 percent of my time on what I do best: building relationships?” Or “What if I could surround myself with sales support that is truly team inspired, results driven marketing and customer obsessed headache-free process?” Welcome to radius financial group! They started radius with one main focus: to offer a better value proposition than any other bank or mortgage company in the country for you, your borrowers and your referral partners. radius can help you grow your business, have a better quality of life, and make more money. For confidential inquires please contact Carla Herrera.

Lender and broker products, software, and services

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Loan officers, if there was an easy button for creating incredible video marketing content on social media, would you press it? Now you can thanks to Video Catalyst by SocialCoach. Say goodbye to the days of wondering what to say, what equipment you’ll need, and how you’ll edit. With Video Catalyst, we’ve made it easy to create compliant, scroll-stopping, professional-grade videos in record time. Here’s how: We write four fresh, relevant (and compliant) scripts for you every month. You simply read the scripts while recording the video from your smartphone and then send it back to us for professional editing, which includes the addition of music, dynamic captions, gifs, and emojis. We then post it to your account for seamless sharing. That’s it. You press record, we do the rest. Want to see how Video Catalyst can unlock the power of video marketing for your business? Check it out here.

Calling all compliance managers! Imagine if you could complete your ECOA/Reg-B Process in the time it takes you to read this blurb. Imagine saving thousands of dollars and hundreds of hours by not working on your ECOA process. Sounds like a dream, right? Well imagine no more! Velma Connector is here to make your compliance dreams come true. Connector automates the whole ECOA process and can do the work of multiple team members, making sure you never miss another NOIA notice, which means never having to worry about a costly fine ever again! If you’re ready to start saving all that time and money, contact Velma today and ask us how we can get you a 300 percent ROI in just the first year!

Is your appraisal vendor performance below average? Book a complimentary appraisal vendor performance consultation with Reggora’s Chief Operations Officer, Alek Roberts, to see how your vendors stack up. You’ll see how your vendors perform relative to industry average turn times, revision rates and fee escalation rates. You’ll also see data on how that impacts your overall origination process, including if and how your operating costs are higher than they need to be. Book now!

Investors and lenders tweak conforming conventional offerings

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United Wholesale Mortgage announced enhancements to its Conventional 1 percent Down product, allowing borrowers with less than 80 percent of the area median income (AMI) to qualify. Those who qualify will put down 1 percent of the loan towards their down payment and UWM will then pay a 2 percent grant up to $4,000, for a total down payment of 3 percent.

Rocket Mortgage and Rocket Pro TPO have introduced ONE+ by Rocket Mortgage, a 1 percent down home loan program that is available for qualifying homebuyers whose income is equal to or less than 80 percent of their area median income (AMI) for single-family homes, including manufactured homes. Rocket Mortgage provides a 2 percent grant towards the down payment. ONE+ completely covers the monthly mortgage insurance fee for the client. Partner with Rocket Pro TPO to take advantage of ONE+ today!

Pennymac updated Conventional LLPAs effective for all Best-Efforts Commitments taken on or after Monday, May 15. Details are available in Announcement 23-34.

The Federal Housing Finance Agency (FHFA) announced the rescission of the DTI ratio-based fee. As a result, Pennymac updated the Best Effort rate sheet effective for all Best Effort Commitments taken on or after Thursday, May 11th. Details were posted in Announcement 23-23: Updates to Conventional LLPAs.

Pennymac is aligning with Freddie Mac’s credit underwriting update, announced in Bulletin 2023-6, adding a requirement that a non-occupant borrower may not be an interested party to the transaction (i.e., the builder, property seller, real estate agent or broker, etc.) This new requirement is effective with loan deliveries on or after 7/3/23. View the Penny Mac Announcement 23-32 for additional information.

Citi Correspondent Lending Bulletin 2023-04 includes credit policy updates on Agency loans appraisal waivers, life insurance net cash value on Non-Agency Jumbo loans and clarifies subordinate financing applicable to Non-Agency Jumbo.

PRMG Product Update 23-26 includes clarification on multiple products. Conventional Products requirements regarding use of business funds in the transaction a cash flow analysis, underwriting review requirements when obtaining prior approval from VA, Alternative AUS Jumbo clarification for properties in a declining market, program fee requirements on CA CalHFA Products, and mortgage insurance coverage requirements on CO CHFA Preferred Plus Conventional.

Many banks are stressed and are not lending. Flagstar Bank has money, is lending and actively looking for SBA 504 loans now. This includes General Purpose Properties, Conventional portion minimum $750,000, 2 years tax return debt service. CA, NV, NY with more states to come, Small Construction work is acceptable with no more than 20 percent of the project including the interim loan and permanent loan, 51 percent or more owner-user commercial. With Prime now at 8.25 percent, it is time to look at a long-term fixed 504 purchase or refinance. You can now refinance a 7(a) loan (or conventional) with an SBA 504 and maybe even get some additional cash out for business purposes.

Citizens Correspondent National Bulletin 2023-12 includes information on Condo Project Manager Update - DU.

Freddie Mac Bulletin 2023-9 announced multiple Selling Guide changes, including updated requirements related to property appraisals and condominium projects. For impacts on AmeriHome guidelines, see Product Announcement 20230504-CL for details.

With Guide Bulletin 2023-11, Freddie Mac announced multiple Selling Guide changes, including updated requirements related to IRS installment agreements and real estate tax abatements and exemptions. For impacts on guidelines, see AmeriHome Product Announcement 20230508-CL for details.

Capital markets: If we’re in a recession why are rates going up?

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Keep two things in mind. The markets, and individuals, don’t like uncertainty. But the future is always uncertain. Second, economic doldrums lead to lower rates. But rates rose again yesterday as the clock wound down on the window for debt ceiling negotiations, with a potential U.S. default looming on the horizon. If the U.S. defaults on its debt, higher mortgage rates are a potential risk facing the economy.

How quickly we’ve moved on from the banking crisis, though loan officers should keep credit tightening in mind. Most banks, including those that failed, own 30-year fixed rate mortgage-backed securities. Those MBS prices have fallen the most with the Fed's sharp run-up in rates, making it likely that banks will buy far fewer MBS (and jumbos) going forward, decreasing demand, widening spreads further, and generally causing mortgage rates to go higher. Rates have been on the rise as of late, and while some of the movement can be attributed to “hawkish” comments from the Fed, the shift higher appears to be global: The German Bund, Japanese Government Bond, and UK Gilt have all moved higher in lockstep.

Investors see the Fed cutting rates this year, even with Chair Powell and his fellow FOMC members doing their best to convince Wall Street that they’re serious about inflation and that no such thing will happen. In fact, recent Fed messaging has been that we may not be done with rate hikes just yet. After 500 basis points of interest rate hikes over the past year, it’s true that the Fed is close to the end of this hiking cycle, at least for the short-term. However, we could see a major sell-off in stocks and bonds if investors succumb to the Fed in this “tug of war” over the central bank’s monetary policy moves in the second half of this year and admit that multiple rate cuts in 2023 aren't in the cards.

Chatter out of the MBA’s conference in Manhattan (in addition to more companies shuttering and frustration over repurchases) included delinquencies picking up for various credit types, volatility driving spreads wider, MSR valuations pricing the impact of buyer burnout, and mortgage credit availability continuing to decline. The collapse of three mid-size US banks and the forced marriage of Credit Suisse to UBS pushed lending standards to tighten across the board, especially for commercial real estate and residential lending.

For residential, the tightening was more pronounced in jumbo and non-QM as opposed to GSE and government loans. Banks becoming more cautious on risk has also led to standards tightening on multi-family, by increasing spreads, raising covenants, and lowering LTVs. Loan demand is also falling (including for HELOCs and other residential real estate loans), while the lending standards are getting tighter, typical for an economy that is poised to enter a recession.

These tighter lending standards exist at a time when there are few homes for sale. The reasons for the scarcity of existing home sales are well known at this point: Lack of inventory, elevated home prices, and half of all mortgaged homes having first-lien interest rates at or below 3.5 percent while rates continue to rise. Those elements are unlikely to change anytime soon. Supply constraints are a familiar topic of discussion with millions of Americans content to keep their rate and not sell anytime soon, and, coupled with today’s homebuyers being exceptionally interest rate sensitive, as most won't accept a rate higher than 5.5 percent, and it’s not a good recipe for lenders.

If mortgage rates fall somewhat, we still have an affordability problem, even with rising wages. Homebuilding will eventually rebound and help this issue, but the rate of decreases in the backlog reported by the builders and elevated cancellation rates don't bode well for an imminent change.

Shifting to the intra-day price moves, despite today’s early close ahead of the long Memorial Day weekend, several key economic releases will be out and could sway the Fed's thinking regarding further rate increases. We've already received personal income and spending for April (+.4 and +.8 percent, respectively, core PCE +4.7 percent year over year), and durable goods orders (+1.1 percent, ex-transportation -.2 percent). Expectations were for income and spending increasing 0.5 percent and 0.4 percent month-over-month, respectively, with the Core PCE Price Index increasing 0.3 percent month-over-month and 4.6 percent year-over-year. Later today brings Michigan sentiment before fixed income futures settle at 1pm ET and cash markets close at 2pm per SIFMA’s recommendation. We begin the day with Agency MBS prices worse by a few ticks (32nds), the 10-year yielding 3.82 after closing yesterday at 3.81 percent, and the 2-year is at 4.56 after the strong, anti-recessionary, data this morning.

My Dad (U.S. Navy, 1942-1962) was always quick to remind me that Memorial Day doesn’t honor servicemen and servicewomen, or veterans. It is a federal holiday in the United States for remembering the people who died while serving in this country’s armed forces. The number totals about 1.1 million, almost half of which were in the Civil War, fighting against one another. First recognized in 1868, it was set on the last Monday in May starting in 1971. Give those who gave the ultimate sacrifice for our nation more than a passing thought, not only Monday but throughout the year!

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, “Doing Business with the Agencies: The Golden Ticket?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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