6.4.24 HELOC Securitizations; Richard Grieser and Taylor Stork on Vendor Costs; Failing Shape of Yield Curve

Thanks to today's podcast sponsor, Visio Lending. Visio is the nation's premier lender for buy and hold investors with over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Visio is fast, simple, and dependable when it comes to financing rental properties. They believe time is money, and strive to be upfront and consistent about their qualifications. Using a simple DSCR rather than a complicated NOI calculation, there are no tax returns or personal financial statements, and their pricing is set, so you always know your rate. Learn more, including about Visio’s top-notch broker program, at https://www.visiolending.com/. 

Transcript

“Hey Rob, thank you for continuing to highlight the insurance issues we’re having, like in
yesterday’s Commentary. Insurance companies are monitoring homes from the sky, and
homeowners across the country have had their coverage ended due to aerial monitoring using
drones, airplanes, and satellites. While we’re on “tech,” have you heard of ‘ActivTrak’?” Yup. It
figures out your employee’s productivity and engagement by watching mouse & keyboard
movements. Of course, there is software that simulates (not stimulates!) mouse movements that
employees can purchase or download. It all turns into a game of cat and mouse! How long will it
be until A.I. is capable of writing its own code, much faster and better than humans? Hey, I don’t
need or want IT people writing like me, or sending my Commentary out when it isn’t me doing it,
or faking politicians’ speeches, just because they can. I’d rather have computer scientists
focused on… making it simpler to change my car clock when the time changes. Likewise, I don’t
need biologists bringing back mammoths or dinosaurs, just because they can. But here’s
something cool: the first tooth re-growing drug has begun tests. No more dentures?! Just in time
for the Baby Boomers to need them. (Today’s podcast is found here, and this week’s are
sponsored by Visio Lending. Visio is the nation's premier lender for buy and hold investors with
over 2.5 billion closed loans for single-family rental properties, including vacation rentals. Hear
Interview with Richard Grieser and Taylor Stork on solutions to high verification and credit costs
that lenders are facing.)
Employment, transitions, & another industry vet’s retirement
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“Mega Capital continues to expand across the country by adding AEs along with
operation staff to support the growth of the organization. In recent months we have rolled
out our new broker platform mPOWERs to help with ease of use for the broker. We have added
improvements to our Non QM platform with MGenius getting an upgrade to help assist brokers
with their NON QM needs. On top of our great rates for conventional and government loas, we
continue to improve our NON QM offerings. 3-month bank statement program, Assets
utilization, and a refi with essentially a mortgage only rating needed. Our latest offering is our
MVP program- $3M Loan amounts, FICO down to 660, 40 yr. I/O’s, transferred appraisals
accepted, P&L with no bank statements required, 1099 program No tax return needed and the
list goes on. Please contact your local AE or Mega Capital at 818 657 2600 to partner with us.
Always looking for great talent to join the team. We are always looking to add sales talent, all
AE’s especially those with the NON QM background, please reach out to Ed Darrow at 818 657
2600 x340.”
Dovenmuehle Mortgage, Inc. announced two promotions within its business development
team: Anna Krogh to Senior Vice President and Director of Business Development and Chris
Torres to Vice President of Business Development and Manager of the Western Region.
Out of Houston comes news that Nations Reliable Lending (NRL Mortgage) has appointed
Steven Curtis as its new Chief Production Officer. “Curtis brings a wealth of expertise and a
proven track record to his role, positioning NRL Mortgage for continued success and growth.”
Another vet is exiting on June 21, this time, out of the Northwest, with Glacier Bank’s head of
servicing Bob Hamilton. “My first job in banking began at the young age of 18 years old
working in the mailroom of Columbia Savings and Loan in Denver, the city I grew up in and I
have worked in some capacity of mortgage banking, mainly in the trenches of loan servicing

ever since. Almost 40 years later, with more than 30 years as a professional servicing leader, I
am delighted to share that I am retiring to pursue more creative and challenging endeavors…”
Software, products, and services for lenders and brokers
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When you are truly valued as a client, then you expect your subservicer to respond timely and
efficiently to resolve any issues you may have. After all, that is not only what you pay them to
do, but what a subservicer who values the relationship and comports themselves as a true
partner should be doing. That is why at Servbank we provide you as a client, a 24/7/365
single dedicated point of contact to respond to and timely resolve any issues you may
have. We know that if it’s important to you then it needs to be important to us. Our responsive
and highly skilled client relations staff resolve 55% of all client requests in 24 hours and 76% in
2 business days. That level of client service is not only the best in class, but also the level of
service that you deserve. If your current subservicer isn’t treating you like a valued client, then
it’s time to be heard… and partner with Servbank. Partner with Servbank.
For independent mortgage banks coping with rising costs per loan, outsourcing accounting is an
elegant solution to what’s become a very common challenge. Whether you have no
accounting expertise in-house or you have a new team with no mortgage experience, you
can tap the Richey May Client Accounting and Advisory Services (CAAS) team for the
support you need. This team is stacked with mortgage industry experts who can tailor your
solution to meet your most pressing needs with no training needed. Need help transitioning to
loan level accounting? Need a fully outsourced function? You got it! Need industry training for
your controller? We can do that. In this article, Richey May’s expert Kim Dittmer answers all
your most frequently asked questions about outsourced accounting as a mortgage bank.
Get quick and precise property insight with VerisiteX from Xactus. Ideal for HELOCs,
Portfolio Monitoring, Disaster Inspections, Renovation and New Construction Draws, it
offers a mobile property inspection and enhanced AVM to help with decisioning where
a full appraisal is not required. Utilize the VerisiteX Photo Report and Collateral Data
Report together for interior and exterior photos, property uploads, and historical data review.
The Collateral Data Report condenses MLS and public record data, valuations, property details,
risk summaries, and foreclosure information into one document. Xactus also provides Appraisal
FirewallX, appraisal management software, and Appraisal ScorecardX, appraisal review
technology, for fast, accurate appraisals and real-time property insights, allowing you to
automate your appraisal process. Learn more at sales@xactus.com or request a showcase
today. Don’t forget to follow Xactus on LinkedIn.
ICE is making servicing simple by embracing the three ‘Cs’: Conversational, curated
interactions that are context aware. That philosophy is embodied in ICE’s new chat-
based servicing interface, which allows users to interact with their servicing system in
plain business language without relying on obscure acronyms, codes, or specialized
syntax. The result is easy-to-use technology that anticipates what users are trying to do, what
resources they need to accomplish a task and what they’ll need to focus on next.  Read ICE’s
latest blog to learn how this new technology — driven by the three ‘Cs’ — can help servicing
teams streamline work processes, reach desired outcomes faster, and provide a more
consistent experience to customers.

Does it feel like your current point-of-sale vendor has lost focus on mortgage? As a mortgage-
specialized partner, Maxwell is committed to giving lenders a competitive advantage in a
changing mortgage market. With Maxwell Point of Sale, lenders can tailor workflows to fit
the unique needs of their organization, so back-end teams can work quickly without
costly interruptions. Compared to a top competitor, Maxwell Point of Sale averages a 5.9%
higher pull-through rate from rate-lock to close. For the average lender using Maxwell POS, this
equates to $42MM in additional loan volume. Schedule a call with the team to learn how
Maxwell Point of Sale can start working for you, your borrowers, and your lending team quickly.
Strategic alliances are alive and well
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Newfi Lending, an industry-leading lender specializing in innovative, non-agency mortgage
solutions, announced a transaction with Dunmor, a leading provider of bridge, fix and flip, and
ground-up construction loans for real estate developers and investors (“Residential Transition
Loans”). “Newfi will provide an initial financing facility to expand Dunmor’s origination capacity
and further equip them to capture the growing market opportunity within the RTL sector. The
transaction also includes a number of milestones structured to align and strengthen the Newfi-
Dunmor relationship over time.” Dunmor provides short-term bridge loans, fix and flip loans, and
construction loans for residential and multifamily investment properties. Dunmor works directly
with borrowers and brokers. Newfi is a multi-channel lender that is “setting the standard for
efficiency, transparency, and service in the mortgage marketplace.”
Capital Markets: does the shape of the yield curve matter?
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Given the amount of equity in the U.S, second mortgages and HELOCs are all the rage. Fitch
Ratings has completed a review of 23 U.S. residential mortgage-backed security (RMBS)
HELOC, Closed-End Seconds, and Seasoned Second Lien Transactions issued within the last
five years. The overall performance of the sector has been mixed, though generally has
improved since the last rating actions. On 489 classes across 23 deals, Fitch ratings upgraded
108 classes and affirmed 381 classes. The Rating Outlooks for these classes include 155
Positive Outlooks and 334 Stable Outlooks. The deals in the review also benefit from the
support provided by the ability for excess spread to be used to reimburse realized losses and
coupon shortfalls. The steady build-up of credit enhancement for deals over the past six to 12
months is one of the most significant drivers for classes with proposed upgrades. Credit
enhancement for upgraded classes has grown on average by 210 basis points over the past six
months.
Remember when “the experts” were predicting a recession based on the inversion of the yield
curve two years ago? Recessions lead to lower rates. How’d that work out? Treasury yields
have now been inverted for the longest stretch on record, with the spread between the 2-year
and 10-year Treasury underwater for close to two years. Back then it had everyone worrying
about a troubling recession. Many of those experts have ceased predicting a recession lately as
the U.S. economy continues to expand, unemployment remains low, and a “soft landing”
increasingly looks like it will be in the cards. Is an inverted yield curve, which has predicted
practically every recession over the past 50 years, faulty or broken?
First, the “yield curve” is a graph. Along the X axis is the maturity of securities (1 year, 2 years,
all the way up to 30 years) and along the Y axis are the yields (rates). Yield curves typically

slope upward, meaning that the yields on longer maturity securities are more than shorter term
securities. So, when short-term yields return more than longer-dated ones, it suggests there is
reason to worry about the long-term economic outlook. It can also signal that the high levels of
short-term yields are unlikely to be sustained as growth slows, which can have an impact on a
range of asset prices. Investors usually factor in Fed rate cuts under those dynamics, with
easing expectations signaling the potential for a faltering economy.
While some think the yield curve is no longer a reliable indicator, others point out its stark
accuracy. The second-to-last time the yield curve inverted was in August 2019, which happened
ahead of the pandemic-induced recession, and the 2y10y inverted again in March 2022, just
before a technical recession emerged in the second quarter of that year. Any decision on a
formal recession is left up to NBER's Business Cycle Dating Committee, which has been
responsible for setting the dates of peaks and troughs of the U.S. economy since 1978. But
since a recession was never formally declared, the NBER has kept investors, the Fed, and
lenders waiting for another one to happen.
Who got it right? The Fed's infamous "transitory" call on inflation, a stock rally that has
confounded Wall Street, and most recently expectations for rate cuts are all among recent
predictions that have led many investors and lenders hoping for lower rates astray in the last
few years. Economists and mainstream analysts have to check their report cards, and recession
talk might be the next failed projection. Unemployment continues to be low, home prices are
doing okay, and the consumer continues to spend, albeit using credit cards.
It’s always been referred to as a “fabled soft-landing,” and maybe for good reason. Treasury
yields fell yesterday as the ISM Manufacturing Index for May showed a deepening contraction in
the domestic manufacturing sector, stoking concerns of a recession in the U.S. The report is yet
another data point showing that the domestic economy is slowing, though the Fed probably
won’t consider easing until more slowing is reflected in the employment data.
Today’s calendar kicks off later this morning with Redbook same store sales for the week ending
June 1, and will be followed by April factory orders, JOLTS job openings, and a couple of short-
duration Treasury auctions. We begin the day with Agency MBS prices little changed from
Monday’s close, the 10-year yielding 4.38 after closing yesterday at 4.40 percent, and the
2-year at 4.79.

Once upon a time in a village, a man appeared and announced to the villagers that he would
buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to the forest and started
catching them.
The man bought thousands at $10 and as supply started to diminish, the villagers stopped their
effort. He further announced that he would now buy at $20. This renewed the efforts of the
villagers, and they started catching monkeys again.
Soon the supply diminished even further, and people started going back to their farms. The offer
increased to $25 each and the supply of monkeys became so little that it was an effort to even
see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since he had to go to
the city on some business, his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the villagers; "Look at all these monkeys in the big
cage that the man has collected. I will sell them to you at $35 and when the man returns from
the city, you can sell them to him for $50 each."

The villagers rounded up with all their savings and bought all the monkeys.
They never saw the man nor his assistant, only monkeys everywhere!
Now you have a better understanding of how the cryptocurrency market works.

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
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Is Only Increasing” . The Commentary’s podcast is live and at any place you obtain your podcasts (like
Apple or Spotify).