11.22.24 Short Versus Long Realities; MGIC's Liz Keuler on Originator Trends; Stronger Existing Home Sales

Thanks to today's podcast sponsor, PHH Mortgage. For over 35 years, PHH Mortgage has provided industry-leading mortgage services. They are one of the largest servicers of residential mortgages in the United States and offer a variety of solutions for the entire mortgage lifecycle. If you are looking for a Correspondent Lending partner or an experienced, award-winning Subservicer who can manage your forward and reverse, residential and commercial, and performing and non-performing loans look no further than PHH. Learn more at business.phhmortgage.com.

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Want a house for a dollar? Italy has them… figure out the impact on comps for appraisals! To the best of my knowledge, my cat Myrtle never lived in Italy before she was adopted, or even traveled there. Plenty of people will be traveling places during this “late in the month” Thanksgiving time, and those who use airplanes might be interested in this write up of TSA Pre versus CLEAR. Is CLEAR worth it? I wonder if Shan Hanes thinks it was worth it, embezzling bank funds? The Federal Reserve Board on Thursday announced that it had prohibited Shan Hanes from future participation in the banking industry. Hanes is the former chief executive officer of Heartland Tri-State Bank and used his position to embezzle $47.1 million of bank funds in a cryptocurrency scheme that led to the bank becoming insolvent and failing in July 2023. (Today’s podcast can be found here and this week’s is sponsored by PHH Mortgage. If you are looking for a Correspondent Lending partner or an experienced, award-winning subservicer who can manage your forward and reverse, residential and commercial, and performing and non-performing loans look no further than PHH. Hear an interview with MGIC’s Liz Keuler on this year’s Loan Originators Survey Report, which contains lots of info about LOs’ challenges, goals and activities.)

Jobs available and transitions

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“GVC Mortgage Expands Leadership Team! GVC Mortgage is excited to announce the addition of Tommy Owen and Robert Neighbors to our leadership team. With 60 years of combined industry expertise, they will play key roles in expanding GVC’s retail presence in new states and supporting strategic growth initiatives. Tommy and Robert’s leadership will be instrumental as we navigate the competitive mortgage market and work to expand our footprint. Jim Janczy, SVP-National Director of Strategic Lending, shared, “Tommy and Robert are proven leaders whose values align perfectly with GVC. Their experience will be critical to our next phase of growth.” Please join us in welcoming Tommy and Robert to GVC Mortgage. We’re eager to see how their contributions will shape our future success!”

A well-capitalized, profitable, and growing IMB is looking to hire a senior level operations manager. This position would report directly to the CEO of the company. The ideal candidate would have a strong background in mortgage banking technology, processes and procedures, and would be a “center stone” for providing leadership to both operations and sales and be able to balance the sometimes conflicting needs of both groups to help build unity and teamwork. If you are interested, please send your confidential resume to Anjelica Nixt for forwarding.

Lender and broker software, services, and products

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The Loan Store, a national wholesale lender, has adopted OptiFunder’s Warehouse Management System (WMS) to enhance warehouse decision-making and streamline funding processes. CEO Phil Shoemaker emphasized the focus on competitive loan pricing, stating that OptiFunder's technology reduces warehouse costs and boosts operational efficiency, maximizing their ability to deliver fast, simple home loans. OptiFunder’s WMS optimizes loan allocations by considering various factors, leading to cost reductions and an average decrease in dwell-time by three days. Michael McFadden, CEO of OptiFunder, highlighted that its system not only lowers lending costs but also allows clients to manage operations effectively through market fluctuations. The WMS integrates with major warehouse banks and key stakeholders. As part of the evaluation process, OptiFunder offers a back-test analysis to compare the impact of its optimized decisions and a prospect’s historical allocation decisions. To learn more about OptiFunder’s WMS for mortgage originators, schedule a demo or connect with the team at MBA Accounting and Finance.

“eRESI recently announced an additional investment by KKR, which will expand funding capabilities plus increase our liquidity offering to clients. "With KKR's support, we have achieved remarkable goals, and we look forward to accomplishing even more in the future," said Gregory Tsang, Chief Executive Officer and Tim Wang, President of eRESI. Our partnership with KKR speaks to the strength of our platform and our commitment to providing exceptional service and next-level liquidity to our partners. As part of this ongoing focus to provide best-in-class support to our Sellers, eRESI is rolling out additional features in our Seller web portal, including online Funding Packages, Seller-led reporting capabilities, and an expanded Resource Center. Stay tuned for much more, as we are thrilled about our mission of increasing access to Non-QM financing options in the mortgage market. For more information, contact your eRESI Representative or email sales@eresimortgage.com.”

Tired of meeting people, and being asked, “What does your company do?" Gaffney Austin can fix that! When it comes to the mortgage business, the crew at Gaffney Austin are the communication experts, available to handle all your PR needs. Looking to get your company in the news or nab notable industry awards? Gaffney Austin’s got you. The staff will work with you to create a powerful communications strategy designed to elevate your company’s public profile and expand your reach. Gaffney Austin builds impactful media campaigns that deliver real results.

Would you get on a plane with broken or outdated flight controls? Would you feel safe flying blind, hoping all systems are functioning? Managing a mortgage business without complete, real-time insights is like piloting a plane without a dashboard. Are you equipped with the key reporting and analytics to steer your business confidently? With Gallus Insights, you’ll have the data and clarity you need right at your fingertips: no guesswork, just precision. Ready to elevate your data game? Connect with Augie Del Rio, founder and CEO of Gallus Insights, to learn how Gallus can help you take control.  

GSE (Freddie & Fannie) updates of note

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Conventional conforming (i.e., Freddie Mac & Fannie Mae) and “government” products (i.e., FHA, VA, USDA) account for the vast majority of residential business. One can bet that both F&F have teams of product specialists, accountants, lawyers, and capital markets specialists running “what if” scenarios and carrying out game theory on what happens if/when they are released from conservatorship. But in the here and now, who’s doing what?

As the industry watches Freddie Mac roll out its fee-based system for avoiding repurchase, Freddie has announced plans to roll out a quarterly report on this in an effort to be more transparent. The industry hopes that Fannie aligns with this.

Fannie Mae dramatically changed its forecast for 2025, slashing existing-home sales expectations by 340,000 (from 11% to 4% growth) and raising its year-end 2025 mortgage rate forecast to 6.3% from 5.6%.

Freddie Mac’s latest announcements garnered some attention with lenders, as noted above. Freddie Mac Expands Repurchase Alternative Pilot for Performing Loans, and Freddie Mac Expands Offerings with a Focus on First-Time Homebuyers. Freddie also sent out a piece titled, “Building Upon Our Progress to Improve Loan Quality.”

FHFA published FHFA Working Paper 24-08: Banking on Buffers: Balance Sheet Responses to Household Demand, Macroeconomic Conditions, and Monetary Policy. This paper examines how banks adapt to tightening regulations, evolving macroeconomic conditions, and changes in household demand. Unlike most analyses of banking regulation, we develop a general equilibrium model in which banks both borrow from and lend to households, allowing us to assess the impact of regulations in conjunction with other macroeconomic factors. The model features an often-overlooked interplay between household portfolio choices and bank financial decisions, emphasizing the contribution of household preferences to the precipitous climb in cash ratios that accompanied reductions in bank leverage following the 2008 global financial crisis.

FHFA issued a new release, its FY 2024 Performance and Accountability Report.

Federal Reserve posted Supervision and Regulation Report summarizing banking conditions and the Federal Reserve’s supervisory and regulatory activities, in conjunction with semiannual testimony before Congress by the Vice Chair for Supervision.

For appraisers, understanding and applying accurate property quality and condition ratings is key to producing reliable and supportable appraisals. Freddie Mac’s Scott Reuter, Single-Family Chief Appraiser, addresses common questions about property quality and condition ratings and offers essential strategies to help ensure consistency and precision. Read the full Q&A’s.

Fannie Mae SVC-2024-06, the November Servicing Guide update clarifies that sellers and servicers are responsible for preventing, detecting, and reporting mortgage fraud, clarifies eMortgage servicing requirements, incorporates changes to the reporting due date for summary reporting mortgage loans, as well as other miscellaneous updates.

Fannie Mae and Freddie Mac updated the Uniform Residential Loan Application (URLA) instructions and Supplemental Consumer Information Form (SCIF) instructions and the related FAQs.

Fannie Mae posted the November Appraiser Quality Monitoring list to Fannie Mae Connect™.

Capital markets: nice existing home sales… for now

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In essence, bond market movement yesterday reflected a balancing act between short-term data surprises and longer-term structural realities. Economic data continues to highlight pockets of resilience within a broader context of persistent structural challenges.

The October Existing Home Sales report surpassed expectations, reaching an annualized sales pace of 3.96 million units, marking a 3.4 percent monthly increase and the first year-over-year gain since July 2021. This improvement primarily mirrors the effect of lower mortgage rates earlier in the year, which temporarily boosted housing activity. However, with mortgage rates having risen again in recent weeks, this momentum is unlikely to persist. Median home prices rose 4.0 percent from October 2023 to $407,200, extending a streak of annual price increases, while inventory ticked up slightly but remained constrained at 4.2 months of supply.

At the same time, weekly jobless claims fell to 213k from 219k, pointing to a still-resilient labor market. This strength complicates the Federal Reserve's path forward, as sustained labor market tightness could keep inflationary pressures elevated. Conversely, the Philadelphia Fed Survey, which gauges manufacturing activity, posted a disappointing reading that was well below expectations, highlighting challenges in the industrial sector.

The bond market's reaction to these data points was relatively muted, as they delivered mixed implications for economic growth and monetary policy. The stronger housing and labor market data suggest underlying economic resilience, reducing the likelihood of aggressive Federal Reserve rate cuts in the near term. However, the weak manufacturing reading and the broader affordability challenges in the housing market underscore areas of softness.

Mortgage rates, which closely track Treasury yields, are likely to remain elevated under these conditions. Mortgage rates ticked up in the latest Primary Mortgage Market Survey from Freddie Mac. For the week ending November 21, the 30- and 15-year mortgage rates respectively rose 6-basis points and 3-basis points to 6.84 percent and 6.02 percent, though still remain lower by 45 basis points and 65 basis points from a year ago. While the late summer optimism about potential Federal Reserve rate cuts offered a brief reprieve, the current outlook suggests slower monetary easing, keeping financing costs high. This dynamic continues to weigh on housing affordability, with buyers contending with elevated home prices and tight inventory levels.

Preliminary October S&P Global Purchasing Managers Indices (PMIs) lead off today’s economic calendar later this morning, and will be followed by final November Michigan sentiment and remarks from Fed Governor Bowman. S&P Global’s Flash Manufacturing and Services PMIs will provide first glimpses of business sentiment post-election. Businesses’ comments about the cumulative impact of the incoming administration’s tax, regulatory, trade, and immigration policies will be of particular interest. The University of Michigan’s initial Survey of Consumer Sentiment for November is expected to show that households’ expectations surged across all dimensions to reach a nearly three-and-a-half year high, as the economic outlook brightens even more post-election. We begin the day with Agency MBS prices slightly improved from Thursday’s close, the 2-year yielding 4.32, and the 10-year yielding 4.39 after closing yesterday at 4.43 percent.

A young man named John received a parrot as a gift. The parrot had a bad attitude and an even worse vocabulary.

Every word out of the bird’s mouth was rude, obnoxious and laced with profanity.

John tried and tried to change the bird’s attitude by consistently saying only polite words, playing soft music and anything else he could think of to ‘clean up’ the bird’s vocabulary.

Finally, John was fed up and he yelled at the parrot. The parrot yelled back. John shook the parrot and the parrot got angrier and even ruder. John, in desperation, threw up his hand, grabbed the

bird and put him in the freezer. For a few minutes, the parrot squawked and kicked and screamed. Then suddenly there was total quiet. Not a peep was heard for over a minute.

Fearing that he’d hurt the parrot, John quickly opened the door to the freezer. The parrot calmly stepped out onto John’s outstretched arms and said “I believe I may have offended you with my rude language and actions. I’m sincerely remorseful for my inappropriate transgressions and I fully intend to do everything I can to correct my rude and unforgivable behavior.”

John was stunned at the change in the bird’s attitude.

As he was about to ask the parrot what had made such a dramatic change in his behavior, the bird spoke-up, very softly, “May I ask what the turkey did?”

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 “A Lender’s Personal Touch Can Help After a Disaster.” 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.)