11.15.24 MBA Quarterly Performance; Castor Financial's Brooks Champagne on Blended Income Qualification; PPI and Prepayment Speeds

Today’s podcast is brought to you by Floify, a leading point-of-sale platform for mortgage professionals. Known for its user-friendly and customizable interface, Floify empowers small and midsize lenders and mortgage brokers with efficiency gains and cost savings. Features like native eSigning and electronic verification of employment expedite turn times and put money back in lenders’ pockets. See the beauty of its simplicity at www.floify.com.

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"To the person who stole my glasses. I will find you; I have contacts." Here in Cleveland, much of the mortgage talk involves conjecture about where we’ll find the Agencies in a few years. If you’d like some “inside baseball” knowledge about what may happen to Freddie Mac and Fannie Mae, you should listen to yesterday’s interview with ex-FHFA Director Mark Calabria. What may happen with conventional conforming interest rates, gfee changes, privatization, the appointment & approval of a new director, net worth changes, capital buffers, the current strength of the Agencies, and so on. The Director of the FHFA, which oversees the conservatorship of Freddie and Fannie, is a position that the president selects and is approved. Interesting, given the spate of cabinet and other posts that are coming out of Mar Largo, U.S. President-elect Donald Trump demanded last Sunday that Republican lawmakers bypass the U.S. Constitution and allow him to appoint key officials without a Senate confirmation vote, aiming to block the little remaining power Democrats have to stymie his administration. Whether this happens, or happens with financial services posts, remains to be seen. Stay tuned! (Today’s podcast can be found here. This week’s is sponsored by Floify. Floify is an easy-to-configure point-of-sale platform that allows each branch or loan officer to customize its look and feel to meet the needs of their lending team, homebuyers, and market. Today’s features an interview with Castor Financial’s Brooks Champagne on how blended income qualifications are getting more borrowers into homes.)

Employment

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“At Evergreen Home Loans™, our On Time and as Promised® guarantee reflects a commitment made possible by the robust support we provide to our loan officers. Last month, we achieved a 99% on-time closing rate, a testament to the dedicated teamwork and resources that set us apart. Our loan officers benefit from industry-leading tools, real-time support, and a collaborative environment, enabling them to deliver dependable service to every borrower. This support allows our team to focus on what they do best: guiding clients toward homeownership with confidence. If you’re a skilled loan officer or branch manager passionate about integrity and excellence, we invite you to explore career opportunities with Evergreen.”

(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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On November 20 at 2pm EST, join America First Credit Union's SVP of Mortgage Lending, Austin Coleman, as he discusses how AFCU streamlined its lending processes and reduced costs. Learn about the challenges AFCU faced, including increased post-COVID costs such as the need for more efficient verification solutions. You'll hear Austin discuss the benefits AFCU achieved Truv using VOIE and Doc Upload products, which led to 80% cost savings per loan file and faster loan processing times. This session will cover the implementation journey, best practices for onboarding loan officers, and the significant impact on conversion rates and closing timelines. Perfect for credit unions and lenders exploring technology-driven efficiencies in mortgage and home equity lending. Come join the conversation!

Evocalize + rebel iQ + Total Expert: Revolutionizing Local Digital Marketing for Mortgage Professionals with NEW Powerful Lead Generation Tools! Exciting news for mortgage professionals: Evocalize has teamed up with Total Expert and rebel iQ to bring powerful, turnkey enterprise-level digital marketing tools directly to loan officers for the first time. This game-changing partnership lets you easily launch sophisticated, targeted lead generation campaigns on Google, Facebook, Instagram, YouTube, and more… No marketing experience required. With just a few clicks, you'll have access to automated, high-performing ad programs and optimized landing pages designed to capture quality leads and instantly engage new clients. Ready to see how this partnership can help you win in your market? Click here to learn more!

It doesn’t have to be this way. You don’t have to choose between LOS functionality and affordability. It’s time to stop settling and start doing things your way. Designed to be both powerful and flexible, Byte gives you total control over your loan process and the freedom to do business the way you want. Maximize efficiency with a new browser-based UI, unlimited custom screens & fields, powerful data governance, flexible API, and workflow automation you can deploy with your in-house team. Request a demo to see why 97% of mortgage bankers say they would recommend Byte to their peers or visit bytesoftware.com to learn more.

Tuesday in this commentary there was mention of a record number of loan repurchase requests. Imagine if lenders had solutions to prevent these loans from being produced? We see these bad loans every day as they are submitted to our cloud native servicing system from other LOS platforms. Name it, we have seen it, incorrect escrows, borrower and co-borrower with the same SSN, incorrect address and more. We are the only rules driven servicing system that can stop these loans from boarding and help prevent issues down the road. MortgageFlex’s new Loan Control boarding tools will apply a rules-based data scrub automatically on each new loan. Any loan with issues will be flagged in a queue and have a red x on the section of the loan that needs review. On the LOS side, our cloud native rules-based solution can stop the faulty loan production and with both Flex systems on the same tech stack repurchases can be eliminated. To see how, contact John McCrea.

“Ready for HMDA Season? Turn Your Fair Lending Data into a Win! With HMDA reporting season just around the corner, your Loan Application Register (LAR) data can reveal either a compliance strength or a redlining risk. Is your team prepared to make it a win? At MQMR, we’re here to help you go beyond the basics. Our experts work with you to analyze lending patterns, uncover growth opportunities, and turn your data into a competitive advantage. Don’t let your data be a barrier: let it drive your success! And here’s some exciting news: Scott Weintraub, our VP of Compliance, will be at the 28th CRA & Fair Lending Colloquium from November 17-20, 2024, ready to share key industry insights. Don’t miss the chance to connect with him and discuss how MQMR can help achieve your fair lending goals. Book time with Scott now to secure your spot!”

Accelerate your closings with certainty. Class Valuation's Inspection-Based Appraisal Waivers offer value certainty and streamlined closings. By leveraging advanced property data via an onsite property data collection, Inspection-Based Appraisal Waivers reduce risk and ensure a smooth closing process. With LTV limits increased from 80% to 97%, more loans now qualify for these efficient waivers. Contact Class Valuation today to learn how to close loans faster and with greater confidence.

Stop wasting time on frustrating tasks! Join us on Tuesday, November 19, 2024, for the Originator Tech Deep Dive and discover how AngelAi’s cutting-edge AI platform can streamline your workflow and boost your business. We’ll show you how AngelAi tackles three key tasks that often consume valuable time: 1) Condo Approvals. Instead of dealing with constant HOA follow-ups, just provide the HOA details to AngelAi, and she’ll handle the rest. 2) Tax Return Reviews. AngelAi quickly and accurately reviews even the most complex tax returns, saving you both time and costs. 3) Closing Process. Once a loan is CTC, brokers often spend hours balancing the CD with the Title Company and waiting days for finalization. AngelAi automates this, balancing the CD and releasing docs to title in just 2-4 hours, significantly faster than traditional methods. Don’t miss this chance to revolutionize your operations. Register here.

Did you make money last quarter? I hope so.

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The Mortgage Bankers Association reported the numbers that many lenders want to hear: Independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net profit of $701 on each loan they originated in the third quarter of 2024, an increase from the reported net profit of $693 per loan in the second quarter of 2024.

In the Mortgage Bankers Association’s (MBA) Quarterly Mortgage Bankers Performance Report, Marina Walsh, CMB, MBA’s VP of Industry Analysis noted, “Mortgage companies reported net production profits for the second consecutive quarter after an unprecedented period of net production losses that spanned two years. Net production profits increased to 18 basis points last quarter, far improved from the average loss of 43 basis points the past two years, with a drop in secondary marketing income offset by a decrease in production expenses.”

Marina addressed servicing values, on which many owners to servicing rights took hits. “The likelihood of higher prepayments in the third quarter resulted in mortgage servicing right (MSR) impairments and less profitability. Net servicing financial income dropped to a loss of $25 per loan serviced in the third quarter, from a gain of $69 per loan observed in the second quarter.

“Overall, it was a decent showing for independent mortgage banks with 71 percent reporting profitability across production and servicing operations, compared to 78 percent in the second quarter. The average pre-tax production profit was 18 basis points (bps) in the third quarter of 2024, up from the reported 17 bps in the second quarter of 2024, and a loss of 34 basis points one year ago. The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 42 basis points.”

“Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 341 bps in the third quarter, down from 347 bps in the second quarter. On a per-loan basis, production revenues decreased to $11,417 per loan in the third quarter, down from $11,499 per loan in the second quarter.”

The MBA reported that total loan production expenses (commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations) decreased to 323 basis points in the third quarter of 2024 from 330 basis points in the second quarter of 2024. Per-loan costs decreased to $10,716 per loan in the third quarter, down from $10,806 per loan in the second quarter of 2024. From the third quarter of 2008 to the last quarter, loan production expenses have averaged $7,573 per loan.

Support your local MBA! The report can be purchased on the MBA's website.

Capital markets: a spate of data but rates treading water

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Take your secondary execution to the next level with the Vice Execution Portal™, your all-inclusive whole loan trading platform from Vice Capital Markets. Tailored specifically to each individual lender’s pipeline, ViceEx™ allows you to easily send/receive aggregator bulk bids and compare agency executions with customizable retained or co-issue servicing values to maximize the precision of your best ex evaluation. Commit to the agencies with confidence knowing ViceEx finds the optimal specified pay-up for each individual loan in a sale to guarantee your best execution that might otherwise be missed in a manual process. ViceEx already trades daily with 50+ bulk investors, FNMA (plus SMP), FHLMC (plus CRX), and gives you a direct line to the Vice leadership team and Senior Traders each with decades of industry experience. Contact Chris Bennett or Troy Baars today for more information.

Investors that are eager for a more aggressive approach to interest rates weren’t too pleased with Fed Chair Powell's remarks yesterday, when he said that the Federal Reserve does not feel pressured to lower interest rates quickly, given the strength of the U.S. economy and inflation remaining above the 2 percent target. Powell highlighted that the Fed has the flexibility to take a more measured pace, signaling that the next steps in monetary policy will be deliberate rather than aggressive.

With economic indicators such as a low 4.1 percent unemployment rate, robust consumer spending, and solid business investment, Powell believes the economy is well-positioned, allowing the Fed to assess the data over time rather than react quickly. Fed speakers have warned investors that the neutral rate may be higher than previously suggested, and that inflation could remain above the Fed’s 2 percent target for some time. However, fed funds futures still see the most likely outcome as a 25-basis points rate cut in December.

We learned yesterday that the October Producer Price Index (PPI) rose by 0.2 percent month-over-month, in line with expectations, while Core PPI, excluding food and energy, increased by 0.3 percent. Additionally, the September PPI headline figure was revised upward to 0.1 percent from 0.0 percent. Year-over-year, overall PPI rose to 2.4 percent from 1.9 percent in September, with Core PPI climbing to 3.1 percent from 3.0 percent. The main takeaway is that inflation remains present at the wholesale level, suggesting the potential for persistently elevated PCE inflation. This could limit the extent of future Fed rate cuts. However, this PPI report is unlikely to significantly impact the Fed's December decision, as PPI is less critical than the PCE Price Index and CPI in shaping Fed policy.

The October report on prepayment speeds (based on November factor data) revealed a significant increase for Fannie Mae 30-year mortgage pools, with speeds up 30 percent from the previous month. This brought the 1-month Constant Prepayment Rate (CPR) to 8.4, marking the fastest rate since June 2022 and the highest for October since 2021. While overall prepayment levels remain subdued, Rocket/Quicken emerged as a consistently fast servicer, appearing among the top five across most coupon and aging categories. In contrast, Citigroup, Planet, and UWM frequently posted slower speeds. Within the UMBS 15-year and 30-year universes, Rocket/Quicken also led the fastest categories, while Wells Fargo and other banks featured more in slower performance tiers. The report highlights that shorter WALA (weighted average loan age) loans tend to exhibit the most activity, especially in the 6-12 and 12-18 month ranges.

Freddie Mac reported both 30- and 15-year mortgage rates slipped 1-basis point to 6.78 percent and 5.99 percent, respectively. Still, from September’s year-to-date lows both remain higher by 70-basis points and 84-basis points, but still lower by 66-basis points and 77-basis points versus a year ago.

The week closes out with an active data calendar and modest Fedspeak: the New York Fed manufacturing index for November, import/export prices for October, and October retail sales. Later today brings industrial production and capacity utilization, factory output for October, business inventories for September, and remarks from Boston Fed President Collins and New York Fed President Williams. We begin Friday with Agency MBS prices unchanged from Thursday evening, the 2-year is at 4.31, and the 10-year yielding 4.43 after closing yesterday at 4.42 percent.

You’re getting old when these ring true:

When you ask me what I am doing today, and I say "nothing," it does not mean I am free. It means I am doing nothing.

If you're sitting in public and a stranger takes the seat next to you, just stare straight ahead and say, "Did you bring the money?”

I finally got eight hours of sleep. It took me three days, but whatever.

I run like the wind(ed).

I hate it when a couple argues in public, and I missed the beginning and don't know whose side I'm on.

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.)