11.6.24 Election Mortgage Update; Eric Rotner and Chandra Srivastava on Housing Inventory; Trump Trade Reinvigorated

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Transcript

I went to a Vikings game with a friend and decided I wanted a drink. I wanted the big soda pop, but when I saw the price, I decided… A Minnesota will do. Here in Minneapolis, one topic of conversation is the speed at which regulators seem to be acting, thinking things will change in January. Attorney Brian Levy wrote, “The CFPB (and the Justice Department) refuse to acknowledge that lender discrimination does not explain housing disparities and continue to pursue these modern-day redlining claims unabated. But, in my view, the Townstone settlement a few weeks ago is an unequivocal recognition by CFPB that its overzealous fair lending interpretations are unlikely to survive judicial challenge.[13] In fact, it's possible we may mark this settlement as the beginning of the end of fair lending enforcement for the mortgage industry as we know it.” An industry vet recently reminded me that, “Berger v. United States, the 1935 U.S. Supreme Court case requiring that, while a prosecutor ‘may strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one.’” (Today’s podcast can be found here, and this week’s is Sponsored by Calque. Partner with Calque to offer better loan solutions. Scale your business with a partner that puts your brand first and empower your clients to buy before they sell. Hear an interview with Cornerstone First Mortgage’s Eric Rotner and Calque’s Chandra Srivastava on creative new products that are helping alleviate the lack of housing supply.)

Employment & planned transitions

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Loan Officers! Is your career aligned with your potential? You know your worth, but is your current role allowing you to reach your full potential? At radius, we believe in pushing boundaries and helping our loan officers achieve what they didn’t think was possible. Let’s talk about how we can unlock your true potential. For confidential inquiries, contact Carla Herrera (781-742-6500).

Dark Matter Technologies announced that Sean Dugan, currently chief revenue officer, will succeed Rich Gagliano as CEO out in April. Gagliano will step into the role of executive chairman. “Dugan and Gagliano have worked side by side for more than 14 years at Dark Matter and its predecessor, Black Knight Origination Technologies. The company serves banks, credit unions and independent mortgage bankers with its loan origination software and AI solutions.”

(As a reminder, anyone searching for employment can post their resume at no charge at www.lendernews.com, and potential employers can view all resumes for several months for only $75.)

Lender and broker software, services, and products

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This industry has an “uncollected appraisal fee” problem. Every time a deal falls out, someone’s eating the fee. Fortunately, lenders using Fee Chaser don’t have this problem. One-click fee collection from within Encompass® by ICE Mortgage Technology™, check out Fee Chaser by LenderLogix today.

Clayton Servicing Oversight offers loan-level testing to ensure servicer compliance with loans in bankruptcy or where a discharge of debt has been ordered. From the time a borrower files for bankruptcy protection to the date the bankruptcy is discharged or when the servicer is granted relief from the automatic stay, the servicer and its attorney networks must be diligent in meeting all deadlines, both court and investor mandated. Clayton’s Servicing Oversight team can help you or your servicer create a tailored module list that fits your specific needs and concerns. Reach out to Clayton VP of Business Development for Servicing Oversight Zaira Rodriguez to review and improve your bankruptcy practices.

Dara AI Docs: Turn docs into data for faster decisions. Whether you’re determining eligibility for potential borrowers or bidding on a portfolio of loans, you deal with 1000s of mortgage documents containing data that’s essential to successful decisions. But it’s not humanly practical to review and/or reconcile 100% of those documents. That’s where Dara AI Docs offers a completely new advantage. Applied in use cases from origination to advance reconciliation for claims, the solution classifies, indexes, and extracts data from loan documents at 3000+ pages per minute and 90%+ accuracy to deliver intelligence that powers the entire loan lifecycle, at any scale (2.8 billion docs and counting). The solution is available now and Team Sagent has just started offering demos, so get the details here and request your own demo to see how it can turbocharge your mortgage operations.

Are you looking for ways to eliminate data waste and streamline employment and income verifications to reduce costs and create more efficiency? Don’t miss Xactus’ upcoming webinar! When you attend “Efficiency Unlocked: The Power of Automated Verification Workflows” you’ll gain valuable insights into its customizable, automated workflows that will save you time and enhance accuracy in verifications. You’ll also discover how to access millions of records, customize cascades, and ensure accuracy, all in one streamlined solution. This is your chance to unlock faster, smarter verification workflows. So mark your calendar for November 13, Noon EST and register today… It’s in just one week! Be sure to join us, and don’t forget to follow Xactus on LinkedIn.

Truv’s new integration with Byte Software brings real-time income and employment data directly into the mortgage origination process, transforming workflows for lenders and creating a faster, smoother experience for borrowers. By leveraging this powerful collaboration, lenders can achieve significant cost savings, enhance automation and customization, and deliver optimized borrower journeys. As Mark Todd, EVP of Sales & Client Services at Byte, said, "We are thrilled to partner with Truv to bring real-time verification to our platform and streamline loan origination like never before." Learn more about this game-changing integration. 

Staying out of trouble in recruiting and hiring

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Tomorrow, on Thursday, November 7, at 1:00 PM EST, Garris Horn LLP’s James Brody, a Senior Partner with extensive experience guiding correspondent lenders and brokers through the complexities of loan officer transitions, will co-host a very timely webinar with The Mortgage Collaborative, titled “Hire & Recruit with Confidence: Best Practices to Mitigate and Defend Against Claims for Poaching and Solicitation.” Known for helping his clients successfully onboard individual and entire groups of loan officers, as well as defending his clients against poaching actions by competitors, James will share important advice and insights on how to equip your organizations with the proper onboarding tools necessary to ensure compliance, protect against poaching actions brought by former employers, and strategies to address circumstances where your top producing loan officers have been hired away by competitors. To register for this free webinar, click here, and for registration or topical related inquiries, please contact Mr. Brody.

Politics and lending: higher rates & less regulation ahead?

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Recently the Commentary noted, "If Donald Trump takes the White House, and the Republicans take both the Senate and the House, it is expected that the perceived pro-business, government bias would limit any fallout from higher nominal rates… Presumably, a Trump win would be bad for bonds as tariffs would raise prices, and a more pro-business regulatory regime would be better for the economy overall, which will keep the Fed from cutting rates as aggressively. A Trump Presidency would also bring back the debate over what to do with the GSEs."

Economists agreed that a win by Republican presidential nominee Donald Trump would lead to higher mortgage rates, as he is expected to impose tariffs on imported products, among other policies, which could drive up the cost of goods and contribute to inflation. Lenders know that the Federal Reserve, not the U.S. president, has the greatest control over the direction of mortgage rates, and that the Fed operates independently of political pressures (currently).

The Federal Reserve is expected to reduce its benchmark interest rate by 25 basis points this week given the slowing inflation rate. So, in theory, mortgage rates will likely be lower next year, not because of the president, but because inflation is pretty much under control now.

Indeed, there is no reason whatsoever to believe that the last Trump Administration’s move toward releasing F&F from conservancy would not continue this time around. That, however, will take 2-3 years, as it is much more complicated than simply pushing a switch. There are complicated policy, procedure, and legal issues that must be replaced or re-thought. Any holder of MBS issued since 2008 will wonder about who is going to stand behind the reps and warrants, for example. It is generally believed that F&F without government backing would increase mortgage rates 1-2 percent, bringing Agency rates closer to non-QM lender rates.

Neither candidate seemed too concerned about deficits, which is a problem. (In fact, has anyone in Congress brought up the topic in the last few decades?) No one in the industry wants any president to have direct influence over the Federal Reserve’s interest rate setting. And Harris’ proposal for first time home buyer credits is not a good policy: helping the demand of housing merely drives up prices and does nothing to motivate builders to build those homes. Yes, there are other proposals, but, like turning an aircraft carrier, they will all take time.

Aside from those things, in my travels there is a constant refrain that a Trump administration will lead to a less burdensome regulatory environment in general… banks, non-banks, DOJ, CFPB, and so on. It isn’t necessarily GSE reform that would ease regulations, but the overall tone of the Administration. As one person quipped, “Under Trump the CFPB will be neutered.”

Capital markets: apps are already plummeting

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As of this writing, the fiscal outlook remains uncertain because the House is still a close call. But many economists believe that with the Trump victory, the adoption of certain policies (curbing immigration and imposing tariffs) will push inflation up and therefore will likely send mortgage rates higher. Home prices could soften as higher rates cause more prospective home buyers to hit increased affordability issues.

We know who the next president of the United States is this morning, but markets didn’t at the close yesterday, hence the wait-and-see mode evident throughout the day. With President Trump the winner, today’s market movement is going to be very interesting as the two candidates had wildly different policy agendas that will impact financial markets in highly various ways. Some clarity on the outcome will be good for volatility on the heels of a large selloff in Treasuries throughout October, the worst monthly performance in the past two years.

ISM Services surprised on the upside in October to mark the highest headline print since July 2022. Prices Paid slipped in line with expectations to register at the lowest level since August. Employment improved to a 14-month high and new orders came in line with expectations. All the components are at expansionary levels and overall, the report provides a reading of better-than-anticipated sentiment in the services sector. Separately, yesterday's $42 billion 10-year note sale met solid demand.

Today’s economic calendar kicked off with mortgage applications decreasing 10.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Applications Survey. It’s a quiet calendar, with the only other event of note being Treasury auctioning $25 billion 30-year bonds before conducting a buyback in 1- to 7.5-year TIPS for up to $500 million. After the election we have Agency MBS price volatility but are generally worse .5-1.0, depending on coupon and maturity, and the 10-year yielding 4.45 after closing yesterday at 4.29 percent.

Three contractors are bidding to fix a broken fence at the White House. One is from Illinois, another is from Tennessee, and the third is from Minnesota.

All three go with a White House official to examine the fence. The Minnesota contractor takes out a tape measure and does some measuring, then works some figures with a pencil. "Well," he says, "I figure the job will run about $900: $400 for materials, $400 for my crew, and $100 profit for me."

The Tennessee contractor also does some measuring and figuring, then says, "I can do this job for $700: $300 for materials, $300 for my crew, and $100 profit for me."

The Illinois contractor doesn't measure, or figure, but leans over to the White House official and whispers, "$2,700."

The official, incredulous, says, "You didn't even measure like the other guys! How did you come up with such a high figure?"

The Illinois contractor whispers back, "$1000 for me, $1000 for you, and we hire the guy from Tennessee to fix the fence."

"Done!" replies the government official.

And that, my friends, is how any stimulus plan will work.

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. The current STRATMOR blog is titled, “Help Borrowers Tap Into $36 trillion Available in Home Equity.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2024 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman. The views and opinions in this newsletter are mine alone unless otherwise specifically stated herein.)